Center for Studying Health System Change

ecause the Boston area is in a state of rapid flux, it is not possible to predict with any certainty its future course or the implications of change for the population. But this first round of site visit observations provides baseline data and insights into those areas that are most important to track.

THE SHAPE OF COMPETITION

Many respondents believe that the nature of competition will change dramatically during the next few years. One issue to track is the acceptance of narrower networks. It is possible that one or more large employers will choose to accept a managed care product with a narrower network of providers in return for lower costs or, possibly, perceived higher quality. This would increase the likelihood that AMC-based systems, which have narrower networks than fee-for-service insurers and health plans, will enter into direct contracting arrangements with self-insured employers or offer insurance products directly. It may also open the market to entry by national firms.

Another issue to track is competition at the sub-network level. If the AMC-based systems succeed in assuming greater amounts of capitation risk, and if employer and consumer preferences for insurance products that afford broad choice are sustained, competition may intensify at the sub-network level. Insurance products might continue to consist of broad networks of thousands of physicians and many hospitals, but providers might be organized into sub-networks that individual enrollees might select at time of enrollment. Employee premium costs and copayments might vary, depending on the sub-network selected. Although the emergence of subnetworks is well underway in Boston under the direction of the AMC-based systems, there are few signs so far that the emerging sub-networks, such as the Partners PCHI system, are seeking brand-name identification in the market through advertising.

THE ROLES OF HEALTH PLANS AND PROVIDER SYSTEMS

The intensity and level of competition within the market undoubtedly will have a profound effect on the roles and functions performed by health plans and provider systems, and the relationships between them. Current dynamics within the insurance industry are pushing local insurers and health plans to rapidly acquire regional stature by focusing resources on network development, marketing and customer relations. At the same time, local market conditions have given way to the development of provider-sponsored systems seeking to assume greater degrees of financial risk and responsibility for care management (e.g., quality and utilization management functions).

It will be important to track the roles, responsibilities and financial investments of various types of organizations in the development of care management systems. Less exclusive relationships between health plans and providers will reduce plans’ incentives to make the required investment and develop the expertise necessary to build more sophisticated care management systems. In a market characterized by large overlapping networks, individual health plans often lack the control and leverage necessary to restructure care delivery systems. Their financial incentive to invest in sophisticated clinical information systems and disease management programs is also attenuated, because the benefits that derive from changing practice patterns accrue to all the competing plans in the area.

Under this scenario, some health plan responsibilities for provider credentialing, quality and utilization management may shift to provider-based care delivery systems. However, if competition were to develop at the sub-network level, health plans might assume new responsibilities for producing descriptive information and comparative quality and cost reports on the various sub-networks to assist consumers in selecting a sub-network.

EFFECTS ON PEOPLE

It is unclear the extent to which health system changes in Boston will affect the accessibility, quality or cost of care. Most respondents felt that there has been little impact to date on consumers, but many were quick to point out that it is much too early to assess the long-term impact of the many organizational changes that have occurred.

The health system changes in Boston have the potential to produce both positive and negative effects. For example, the formation of more organized systems of care may result in more coordinated, effective and efficient care management programs, but this will only happen if these systems invest in the management and information system infrastructures needed to improve patient care. Similarly, Medicaid recipients enrolled in managed care options may benefit from more coordinated and comprehensive care, but depending on the contractual arrangements that develop between safety net providers and health plans, they may experience disruptions in established provider relationships and encounter a less culturally sensitive delivery system. It will be important to monitor the impact of health system changes in these and other areas.