Whatever Happened To Managed Care?

DrRich | January 24th, 2012 - 7:18 am


In his last post, DrRich demonstrated that our modern American healthcare system proposes to treat individual patients as if they were merely members of a herd of cattle or sheep.*

*Doctors, on the other hand, will be treated like the border collies who – responding instantly to the various complex whistles, hand gestures, and occasional (less complex) kicks administered by their masters – will keep the herd nicely organized into manageable clusters.

But we should take note that this systematic, official devaluation of individual worth was not produced out of whole cloth by the Obamacare legislation (nor would it be completely overturned by its repeal). Rather, it has been in the works for several decades, the natural, evolutionary result of a philosophy of healthcare that was all the rage until just a few years ago, but which – mysteriously – we seem to hear very little about these days. DrRich speaks, of course, of managed care.

Like many of the current travesties taking place within our healthcare system, managed care began with a pretty reasonable idea; namely, to apply certain management principles to the healthcare system that have been used successfully in other industries, thereby injecting logic, organization, and accountability to what had been a bastion of disorganization and inefficiency.

The unifying idea behind managed care boils down to one word: standardization. Standardization is virtually a synonym for industry. In industry, standardization is the primary means of optimizing the two essential factors in any industrial process: quality and cost.

This proposition can be stated formally as the Axiom of Industry:

The standardization of any industrial process will improve the outcome and reduce the cost of that process.

If you had a widget-making factory, you would break your manufacturing process down into discrete, reproducible, repeatable steps and then optimize the procedures and processes necessary to accomplish each step. To further improve the quality of your finished product (or to reduce the cost of producing it), you would reexamine the steps, one by one, seeking opportunities for improvement. You would need to understand the process thoroughly, and you would need to collect data about how well the process works. But with the right information, you could almost certainly identify a few minor changes to improve the manufacturing process. The beauty in such a system is that you have only to make one change — to the process itself — and every widget that comes off the line after you make that change will be improved.

So standardization is good. It leads to higher quality and lower cost. Conversely, variation is bad. It reduces quality and raises cost.

Proponents of managed care argued that standardization should be just as useful in healthcare as it is in other industries. As medical care has traditionally been individualized, highly variable, and without any semblance of standardization, there must be a huge opportunity to improve the processes of care and to make them both cheaper and more effective. There is obvious merit in such an idea.

Perhaps the most direct, and the most successful, application of managed care practices to modern medicine was the adoption of “critical pathways” in the 1990s.

Critical pathways are blueprints for delivering standardized care to patients with specific medical problems. Consider a critical pathway for hip replacement surgery. The critical pathway is a specific schedule of which services are to be provided for the patient and when, from the date of hospital admission until the date of discharge (which is, of course, predetermined). Checklists are created for which laboratory tests to order and when, which medications to administer at which times, and which specific complications to check for. Everyone involved in the patient’s care has their own relevant checklist. From the moment of the patient’s hospital admission, the critical pathway predetermines when to take vital signs, when to get the patient out of bed, when to begin physical therapy, and when to provide standardized instructions to the patient before discharge. Every vital service is included, and all extraneous services are omitted.

A “case manager” monitors the care each patient receives under the critical pathway. Every deviation from the prescribed procedure is tabulated as a “variance.” Variances are tracked not to decide who to punish, but to identify areas of the process that need improvement. If too many instances of a particular variance are seen in a critical pathway, then either medical personnel need to be retrained on following the pathway appropriately, or the pathway itself should be changed to reflect more realistic expectations.

Critical pathways, in fact, proved to be extremely helpful in many cases. But of course there were some drawbacks and limitations.

First, critical pathways are only useful for delivering medical services, like elective surgery, in which the process of care can be broken down into a predictable series of discrete, reproducible tasks that generate reproducible results. In other words, industrial management tools only work when the process of care is similar to the process of making widgets.

Critical pathways are almost worthless when you are dealing with medical illnesses in which neither the diagnostic procedures nor the treatments that may be employed can be predicted or, therefore, standardized. For instance, it has proven impossible to develop workable critical pathways to manage patients with congestive heart failure (CHF). Knowing only that a patient has been admitted to the hospital with CHF tells you nothing about whether that patient will require cardiac catheterization, a stent, bypass surgery, valve replacement, a pacemaker, an implantable defibrillator, a mechanical ventilator, a prolonged and complicated stay in the intensive care unit, or just a couple of diuretic tablets and overnight observation. No two patients with CHF are alike; and there is no such thing as a standard patient. Unfortunately, most non-surgical medical services fall into this category.

Second, it turns out that when you are taking care of patients, the Axiom of Industry simply does not hold true. Standardization does not always improve outcomes and reduce cost. The reason for this is: Patients are not widgets. And while in theory everyone seems to agree that patients are not widgets, the implications of this fact appear to escape many of our public health experts.

If you’re a widget maker, deciding between two manufacturing processes is a matter of economics. Nobody expects you to consider the widget itself. The outcome by which you are judged has nothing to do with how many individual widgets get discarded during the manufacturing process or even the quality of the widgets that pass final inspection. Instead, it’s the bottom line: how much profit you make in relation to whatever level of quality you put into the widget. So the quality of the widget is not necessarily maximized, instead it’s optimized, tuned to the optimal quality/cost ratio as determined by the market forces of the day. This is why, for a widget maker, the axiom holds: standardization, by rooting out variability, reduces the cost of making the widget (whatever quality level you choose). This automatically improves the outcome, because the outcome the manufacturer cares about is overall profit.

If instead of running a widget company you’re practicing medicine, the calculus is supposed to be different. You’re supposed to be more interested in how things turn out for individual patients than you are in the bottom line. So an expensive process that yields a better clinical outcome is one most people (patients, at least) would expect you to use, even though it only gets you a healthier patient and doesn’t help your bottom line. A process that increases patients’ mortality rate by five percent is one you should disregard, even if it is substantially cheaper than the alternative. The clinical outcomes experienced by patients — the measure of success you’re supposed to be concerned about — may move in the same direction as costs, or in the opposite direction. But because you’re dealing with patients instead of widgets, the Axiom of Industry doesn’t hold – and outcomes and costs do not always move in the same direction.

So the push to strictly apply managed care techniques to healthcare created a dilemma for doctors. Doctors – the widget-makers in this scheme – tried diligently to apply standardized procedures such as critical pathways to the care of their patients. But the more un-widget-like the medical services they were providing, the more often they were compelled to make “exceptions” to the prescribed standardized process, in order to best serve their individual patients.

Such exceptions are a legitimate and valued aspect of any industrial process. In the widget-making world, exceptions reveal that the process needs to be tweaked to make it more usable. Exceptions lead to further iterations and refinements of the process, and a steadily improving result. Exceptions are what allow these industrial processes to become self-correcting.

But in the messy world of patient care, the exceptions revealed instead that industry-like standardization only works for a minority of medical services. No amount of tweaking can standardize the management of complex patients with complex combinations of illnesses.

It did not take long for doctors to simply stop attempting to use critical pathways for non-widget-like medical services. They did this because they actually cared about what happened to the individual widgets in their charge.

Similarly, it did not take long for our public health experts to recognize the same problem. From their standpoint, however, the problem was not that patients are not widgets. The problem was that the doctors on the scene cared about the widgets. Further analysis revealed that the root of the problem was that classic managed care techniques were administered locally, and therefore the misguided loyalties of the doctors on the scene were allowed to rule the day.

The reason we don’t hear about managed care anymore is that such terminology refers back to those locally-administered, iterative, self-correcting, continuously improving industrial processes. And our public health experts have now realized that this model does not work, and must no longer be encouraged.

The solution to the widget-makers dilemma is to remove the dilemma. Since a dilemma requires one to choose between two bad options, any dilemma can be resolved by simply removing the choice. And this is what has now been accomplished.

There is no dilemma for physicians any more. Clinical decisions are now to be made centrally, through the “guidelines,” handed down by GOD panels (Government Operatives Deliberating), which will prescribe precisely who is to get what, when and how. Doctors are now enjoined, both by law and by the new medical ethics, to follow those “guidelines” to the letter, without exception.

Whoever thought that some day we would fondly recall managed care as the good old days?

5 Responses to “Whatever Happened To Managed Care?”

  1. pcb says:

    Widget makers don’t take the preferences and values of a widget into consideration when producting widgets either, another difference between widget making and practicing medicine.

  2. Mike K says:

    Industrial processes, akin to “lean” manufacturing can be used for ancillary measures, like running the hospital pharmacy, with benefit. Surgical conditions and trauma are both amenable to critical pathway type rules because they are less complex than diseases of age and degeneration. Trauma also benefits because things happen so fast.

  3. Laura says:

    The latest twist on this that I’ve heard about is

  4. Tess says:

    Guidelines are not ‘required’ …the word is not defined you say it is. They are a reference to check back to and to document to on patients when then and if they apply to your pt. they are usually what we call best practice and include all tea members contributions. It is much safer for the patient this way and are evidence-based to keep up with important knowledge change.

    • DrRich says:

      Dear, dear Tess,

      I am certain that your clear-eyed message on guidelines (which lesser people might brush off as youthful credulousness) will provide great comfort to those of my colleagues who are at this moment subject to a secretive criminal investigation by the Department of Justice for violations of such guidelines.


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