Managed Care Research Paper

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Managed care is a way of organizing healthcare provision for the population of a region, state, or defined community. There is no generally accepted definition. The technological development of medicine has led to enormous cost increases. Managed care is a way of increasing efficiency in healthcare provision while reducing costs. It integrates various service providers into a supply chain of managed care organizations.

There are a number of ethical problems relating to managed care. Cost reduction strategies can clash with the goals of medicine which are to preserve or restore health and to avoid the onset of disease through prevention. The limitation of services envisaged may restrict the autonomy and freedom of medical-related decisions made by the patient and their physicians. Moreover, even the freedom to choose a physician is restricted in many cases. Creating a catalogue of services for a managed care organization touches on questions of prioritization. There may be conflicts of loyalty for healthcare providers if cost reduction may influence quality of care. The establishment of the managed care system therefore affects fundamental issues of justice, patient autonomy, organizational ethics, and the definition of the goals of medicine.


Managed care is a way of organizing healthcare for the population of a region, state, or defined communities. The type of medical treatment and the diseases being treated do not differ from other forms of healthcare.

Traditionally, the scale of medical treatment provided is determined within the context of the interaction between patient and doctor. The services provided will be reimbursed by the patient or the insurance company. Depending on the structure of the health service in different countries, the costs may be paid by the state.

Medical treatment is complex. A large number of different specialists and professional groups are often involved. Due to medical advances, diagnosis and treatment are increasingly fragmented. Managed care aims to integrate the various partners involved in the provision of healthcare services. And it does so in an environment of an increasingly complex medical system. The objective is to provide effective medical treatment while increasing efficiency. The latter aspect is important in view of rising healthcare costs in all developed countries.

One feature of the structures of managed care is that the payers and providers of healthcare services – not the individual patients and their doctors – control the procedures and the way in which healthcare services are provided. This also means that the traditional divisions between various sectors of the health service are removed. This includes, for example, the division between hospital care and out-of-hospital treatment. Traditional sectors are overridden in favor of comprehensive treatment strategies and standardized financial control.

Structural requirements and the nature of cost reimbursement affect the quality of medical care for each population or defined community. Managed care therefore addresses issues relating to distributive justice, prioritization of medical services, the confidentiality of the doctor-patient relationship, and the right of patients to decide for themselves. Furthermore, the issue in some countries is whether patients have any access to medical care at all.


The development of technologically and pharmacologically based medicine has led to enormous cost increases in the health service. Medical advances have made it possible to treat an increasing number of diseases. The introduction of new diagnostic procedures makes it possible to interpret an increasing number of conditions affecting the human body and psychological reactions in terms of them being pathological, i.e., being a disease (or illness) or a condition associated to a risk of disease. Frequently, these conditions can be diagnosed even years in advance. Medical surveillance strategies following diagnosis are deemed necessary for increasing numbers of people. The demographic development of populations in developed countries, in particular, is worth noting. More and more people are living longer. More and more people are using medical services. Against this background, the concept of managed care was first developed in the USA with the aim of reducing healthcare costs (Kongstvedt 2012).

Until the 1960s and 1970s of the last century, costs of medical services in the USA have been reimbursed for each specific service (fee for service). Managed care aims to bundle services together and offer these to patients as healthcare packages. In a typical case, the costs are provided in advance, detailing the budget for a provider organization or health maintenance organization (HMO). The total budget is calculated on the basis of average healthcare costs in previous years. The cost risk is thereby transferred to the service provider. Payers are able to calculate with fixed budgets and expenditures.

The external motive for the development of managed care in the USA was the crisis in the Medicare system (Kongstvedt 2012). Elderly and disabled citizens are treated within the framework of this public and federal health insurance system. The development outlined above led to significant cost increases at the end of the 1960s and the decades that followed. Out of this grew the urgent need to reform provisions relating to healthcare reimbursement and the provision of services.

After in-depth political debate, the concept of managed care was launched. It has had a significant impact on public healthcare in the USA. First, a series of managed care organizations was set up. The most important forms of organization are the so-called health maintenance organizations (HMOs). So-called preferred provider organizations (PPOs) and point of service (POSs) organizations were also set up. Between these forms of organization, there are overlaps. The health maintenance organization (HMO), in particular, plays a prominent role in the US healthcare. More recently, accountable care organizations (ACO) have been established within the framework of the healthcare reform in the USA (Fisher and Shortell 2010). The goal is to have even more organized provider groups that will ensure improved care delivery while containing costs.

Healthcare systems in most developed countries and in less developed countries are fundamentally different. However, the problems of financing present themselves in the same way in the face of rising costs. Some European countries such as first and foremost Switzerland, but also Germany, the United Kingdom, France, and the Netherlands, have integrated elements of managed care into their healthcare systems. However, making comparisons between them is not easy because the systems are different.

Conceptual Clarification

What managed care systems have in common – irrespective of the different ways in which they are implemented – is that healthcare services are offered as a package. They prescribe a treatment package that embraces the various traditional sectors. The goal is to provide seamless care. Outpatient treatment can continue, preferably without being subject to delays and loss of information in the hospital – and vice versa.

Managed care provides for restrictions in the free choice of doctor. This is because the costs of medical treatment for patients enrolled in a managed care organization will only be refunded if they are provided by contractually bound providers. Doctors are often employees of managed care organizations. Providers and managed care organizations are given financial incentives to save costs (Rodwin 2010). This is done through pre-negotiated budgets. They are usually calculated on the basis of services provided over the previous years and negotiated with the payers. The institutions are financially successful if they manage to minimize the use of resources and reduce services, if necessary, thereby reducing costs.

These incentives contain the risk that patients receive inadequate care and that the treatment is not satisfactory (Rodwin 2010). The quality of medical care should therefore be safeguarded by the provision of suitable guidelines. Restrictions to the accessing of medical services will also be introduced, for example, by general practitioners (GP) acting as so-called gatekeepers. Patients should first see a GP. Only when a GP deems that further treatment by a specialist is necessary will the costs for specialized treatment be incurred. The patient needs to obtain a referral by a GP to see a specialist. Frequently, the system does not make it possible for the patient to see a specialist directly. External and internal reviews should disclose the cost structure for managed care organizations and verify the quality of the services provided.

The variance in organizing healthcare is one reason that managed care has only been implemented to a limited extent in other countries, such as in the German health service. However, elements of managed care can also be found here. The role of GPs as gatekeepers is emboldened by financial incentives. The effect was achieved by introducing the so-called specialist’s practice fee, which was not to pay, if the patient has already consulted their GP. However, the effect was only temporary because the practice fee was later abolished again for political reasons. For a while, so-called disease management programs have been promoted in Germany. Patients that enrolled in these programs are guaranteed multidisciplinary care for specific diseases. The main focus was the treatment of chronic diseases such as diabetes mellitus. However, it was not clear to patients what the advantage was, as long as other patients could also get equal treatment without being subject to limitations set by the program.

There are also elements of managed care in the healthcare systems operating in Switzerland and the United Kingdom, to name just two examples. The state-funded National Health Service is a feature of the United Kingdom.

In the USA, managed care is a key component in the structure of healthcare (Kongstvedt 2012). Healthcare provision for a community or group of persons is organized as people enroll in a health maintenance organization or who are registered in one by their employer. Enrolment by employers is typical in the USA. Health insurance policies are often part of the employment contract. There is usually no provision of services outside a managed care program. The costs of treatment by providers (doctors, clinics) outside the organization are not refunded. Exceptions are only made for treating emergencies.

Ethical Dimensions

Managed care poses ethical challenges to medical practice. In what follows ethical problems are outlined in structured passages, yet, it is clear that some aspects will overlap with one another.

Increasing Efficiency: Traditional Forms Of Reimbursement Of Healthcare Costs And The Challenges Brought About By Rising Costs

The traditional form of reimbursing costs for health services in developed countries had been payment for services provided (fee for service). This even applies where there are socially established systems of health insurance. In many countries with almost complete healthcare coverage of the population, the majority of services are reimbursed by insurers based on the extent and the nature of the service provided.

Due to many factors, there has been an explosion in costs. The key factor is technological progress. There is an increasing number of diagnostic methods and treatments for a growing number of diseases. However, the term increase in costs is misleading if it were to be understood in terms of increasing prices for specific medical services. The opposite is the case. In almost all countries with developed healthcare services, it can be seen that prices for medical services fall once they have been approved and introduced. Services do not become more expensive. They become cheaper. However, the number of services provided is increasing disproportionately. In line with technological advances and increasing knowledge relating to biomedicine, an increasing number of services are becoming available (drugs, new diagnostic and treatment procedures, etc.). There is therefore an explosion in the range of services available. As well the number of persons/patients who may benefit from it is rising. This leads to excessive demands on social insurance systems.

This phenomenon is evident in a range of countries. This applies to state-controlled systems and all-inclusive healthcare provision such as that provided by the National Health Service in the United Kingdom. It also applies to mixed systems such as in Germany or healthcare services based largely on private insurance systems such as in the USA.

Fee-for-service payment suggests an adequate balance between service and cost reimbursement. Cost reimbursement that is partly government controlled, on the one hand, and increasing commercialization in the health service, on the other, dissarange the pricing mechanism. Providers of medical services are interested in expanding services. In the case of insurance benefits, the expansion of services comes at the expense of the insurance community. The bond of service providers – the doctors – to the medical indication loosens.

This is a challenge for the traditional relationship of trust between the physician and patient. The relationship between the physician and patient is characterized by a particular asymmetry. The patient’s trust is based on the assumption that the actions taken by their doctors are focused on the patient’s health. Doctors may not make use of the source of knowledge and experience to carry out hidden performance enhancements for their benefit. However, it would be naive to assume that these economic incentives would not be effective. The phenomenon exists and a corresponding critique has accompanied medicine for centuries.

It is therefore legitimate when regulatory health policy intervenes in this area in many countries. The policy may strive to set financial incentives for deploying available economic reserves in healthcare in a way that is targeted and which does not waste resources. Deploying financial resources in a targeted way to maintain and restore the health of the members of a community is a high ethical goal (Buchanan 1988; Baily 2003).

Yet, so far there had been no scientific-based proof that managed care will be able to ensure more cost-effective care delivery. Quite recently, a performance difference had been shown for the new accountable care organizations in the USA. One year after their introduction, a modest saving had been found (1–2 %) (McWilliams et al. 2015). Simultaneously, there had been an improvement in some measures of care. Yet, these results are to be seen as preliminary and need to be confirmed.

Solidarity In The Health Service

Health is a good, not a commodity. It cannot be compared to other economic interests and goods. The humanity of a society is proven in its ability to provide all its members with reasonable healthcare provision covering at least the major health risks. While, for example, in the majority of European countries, some Asian countries, and Canada, the healthcare of the population is protected almost completely by different insurance systems, the US system which is based more on private competition has resulted in reduced healthcare provision for about one third of the population. A large number of people in less developed countries have inadequate access to healthcare.

Forms of managed care may be appropriate in order to curb the excessive costs of healthcare in developed countries. On the other hand, models may be helpful to provide large parts of the population of less developed countries with the access to medical healthcare. This involves ensuring that large sections of the world’s population are included in health systems. In the International Covenant on Economic, Social and Cultural Rights, the United Nations defines a right to receive appropriate healthcare. Conditions are to be created that secure to all medical service in case of sickness.

This statement may give rise to an ethical conflict which may be found similar in managed care. Health initiatives can be targeted at communities or at the requirements of individuals in society (Emanuel 2000). Depending on the choice of perspective, this leads to fundamentally different approaches. In terms of society, immunizations and preventative action may be more important than providing costly surgical procedures such as organ transplants which are only relevant to a few patients. The question of equity of access to care and the question of individual needs should be balanced in an appropriate way.

In terms of managed care, the question to address is: what are the aims of a managed care organization (Emanuel 2000)? In the western world, the individual’s autonomy and right to decide for himself/herself are deemed very valuable. The needs of the individual are therefore held in high regard. Justifiably, however, individual access to healthcare services may be limited (Buchanan 1988). The condition is that various goals of healthcare are made transparent and developed according to democratic processes (Fleck 1994).

Patient’s Autonomy And Choices, Transparency And Confidentiality

Managed care aims to reduce healthcare costs. Forms of organization specifically developed for this may cause a number of ethical problems. Typically, therefore, the free choice of a doctor is limited in managed care organizations. As well services are limited (Kongstvedt 2012). The specified service packages have generally not had any democratic legitimacy. Alternatively, other offers, from which people can choose, must at least be made available. People should therefore be able to choose from at least a number of managed care organizations (Emanuel 2000).

Managed care may unduly limit the autonomy of patients. This may be the case at least when services are not made known in a transparent system, when they cannot be approved by the person concerned or no legitimate processes can be set up. By using suitable market mechanisms (advertising, etc.), competition between various managed care organizations can, given the complexity of the issues, push patients into choosing service packages that are unsuitable for them. It is therefore necessary to use appropriate procedures to ensure that the range of services and costs incurred for those affected are kept transparent. Forms of service prioritization must also be kept transparent (Fleck 1994).

On the other hand, within a managed care system, the doctor/patient relationship must also be specially protected. The prescribed form of organization and controlling must not jeopardize confidentiality and trust. In particular, in the era of Big Data, there are peculiar risks for data protection. As in managed care there are chains of providers connected, and with respect to new IT, personal data are difficult to hold confidential. Suitable procedures should therefore be put in place. Yet, concerning new technology, there is no proven strategy so far to protect patients’ data (Sahm 2010).

Loyalties Of Service Providers/Conflicts Of Interest

The employees of managed care organizations are loyal toward their managed care organizations from the date on which they are appointed. However, as carers or doctors, they are under an ethical obligation primarily in regard to the patient. There may be conflicts of loyalty, particularly when financial incentives are introduced that are designed to bring about the efficient, i.e., decreased use of resources (Emanuel 2000; Rodwin 2010).

It may seem superfluous to mention this specifically. However, the objectives of a managed care organization must not be dominated by financial considerations. Managed care is primarily focused on restoring and maintaining health and preventing the onset of disease (Emanuel 2000).

There are problems of organizational ethics that result from this. Financial conflicts of interests must be disclosed and explained to the patient. Regulations are useful, just as they have been drawn up for addressing the relationship between doctors and the pharmaceutical industry (as in, e.g., the Sunshine Act) (Sahm 2013).

Ensuring The Quality Of Medical Services

In the case of limited resources, procedures relating to quality assurance and quality management may help safeguard the provision of medical services. Suitable test methods and forms of control must ensure compliance with the rules relating to the practice of medicine (Goldstein et al. 2001). Introducing appropriate documentation requirements and a commitment to quality assurance can help to bring this about. It is therefore an ethical imperative that managed care organizations provide suitable quality assurance methods. Results should be disclosed.

The integration of new medical services into the system must also be ensured. The question of what level of scientific evidence is necessary for a new method to be accepted onto the list of approved methods must be presented in a transparent process.

Allocation Of Resources

The question of which medical services are offered for which patients is not self-evident, particularly when there are limitations on the scale of any service provided. The question of medical indication becomes an ethical challenge when resources are scarce. It is therefore necessary to make transparent in advance the conditions according to which services are being requested and are refundable (Fleck 1994).

The relationship of so-called alternative medical procedures and evidence-based medicine should also be clarified. Preference must be given to evidence-based medicine in the context of managed care. However, it should be made clear that this is itself a value-based judgment.

“Industrialization” Of Care

The aim of managed care is to increase efficiency in healthcare provision. Based on the approach of managed care, there is a tendency to give medical healthcare provision a commercial complexion. There is a risk that the specific features of medical practice are overlooked. Patients become customers. However, this picture does not do justice to the patient’s particular circumstances in terms of his/her illness.

What defines the doctor/patient relationship, for example, is how it reflects on the situation of the individual patient. The existential concern of the individual patient and the social circumstances in which the disease occurs must be recognized.

Decisions on medical interventions or the specific omission of such interventions can only be partially codified in guidelines and policies. On the other hand, there are legitimate concerns for increasing efficiency in the health service.

It is therefore an ethical imperative to use appropriate structures within the organization to address the specific features of medical practice and the patients/physician encounter. Such provisions should be incorporated into the guiding principles of managed care organizations (Rodwin 2010). It is vital to protect the necessary freedom of action to respond to the needs of the individual. This includes protecting the confidentiality of the doctor/patient relationship and the handling of medical data.


Given the complexity and range of different processes in managed care organizations, there are special requirements in terms of communication. This applies in the strictest sense to the relationship between doctors and patients in regard to their disease and the explanation of the medical services being offered (Emanuel 2000). On the other hand, this also applies to the creation of service packages, the changes to these packages, and the involvement of the population.

In some states, prioritization lists of medical services have been introduced with the involvement of citizens (Fleck 1994). This has been the case in Oregon in the USA and in Scandinavia. Citizen involvement results in prioritization that is different to that conceived by medical experts. The way in which medical experts define the goals of medicine is often different to that of patients and laypersons. A suitable balance must be found in terms of the principles of justice, the appropriateness of medical services, and the freedom to choose and decide. This can only be assured by appropriate forms of communication and participation which ensure transparency in the decision being made.

Managed Care In Less Developed Countries

In less developed countries, a range of services provided by specific organizations is often the only form of healthcare. The issue is less about reducing costs and more about the range of medical services. Nonprofit organizations also play an important role. Large parts of the population in less developed countries have no access to healthcare services. In terms of a health service based on managed care, it is appropriate to offer basic care and preventative healthcare in ways that are efficient and cost-effective. The balance of services being offered, the question of alternative services provided by other managed care organizations, or the problem of the free choice of doctor are not the issues at stake. It is much more about simply providing the population with access to healthcare.

Nevertheless, the decision of what basic healthcare services should be provided in countries where the standard of living is low is an ethical problem that is often overlooked. Surgical services, for example, are often deferred in favor of preventative measures such as vaccination campaigns, etc. However, the personal and economic consequences for those affected and their families are disproportionately large when no minimum standard of surgical treatment is available (Mock et al. 2015). Consideration should be given to effectiveness and the goal of health preservation in the choice of services that is available in underdeveloped countries. This is not just in terms of optimizing equal distribution of limited resources. Careful consideration of effectiveness and efficiency including the conditions of scarce resources is crucial and an ethical imperative.


Rising expenditures in healthcare costs are driving forces to implement cost containment policies in many countries. Managed care is an organizational process to increase efficiency in healthcare provision. Yet, the idea of managed care is accompanied by a set of ethical challenges that need to be met to preserve the particularities of healthcare. Among others are preserving patient’s autonomy, ensuring transparency in setting priorities, securing high-quality care, avoiding conflicts of interest, and assuring confidentiality in times of Big Data.

If these ethical challenges are met appropriately, managed care may have a beneficial effect on healthcare delivery, may preserve fairness in healthcare, and may secure access to healthcare where large parts of the population have had none so far..

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