Managed Care Reflections: A Q&A With Jan E. Berger, MD, MJ

AJMC: How has the concept of managed care, and the conversations around it, changed over the past 30 years?

BERGER: I want to start by saying that many of the conversations that are occurring today are very similar to the conversations of the 1980s when I began my medical career in managed care. The managed care concepts of the 1980s and 1990s brought us great advances in areas such as focus on prevention, use of nationally recognized guidelines, population health, and quality metrics. In addition to these clinical concepts, managed care brought changes in financing and the beginnings of team care.

Health care is a cyclical industry. I am now seeing the third generation of this cycle. I joke that clearly I have been working in health care for too long. Many of the topics and foci of the early period of managed care remain today but with different wording.

For instance, in the realm of prevention, uptake of childhood vaccines went from about 50% to over 90%. Much of what was achieved during that time has continued until COVID-19. Unfortunately, vaccines have recently been the target of misinformation and distrust in science and the health care environment. With the new administration arriving in 2025, there may be increased focus on other areas of prevention such as exercise, nutrition, and mental health. Many of these areas of wellness and prevention were early foci of managed care but lost a bit of energy over the last few years.

In terms of metrics, early managed care focused data on clinical and process improvement using the Healthcare Effectiveness Data and Information Set and the National Committee for Quality Assurance as the foundation. The accessibility of data and the analytics available to us have come a long way in the last 30 years. The next step is to find ways to utilize the data in real time to create a more efficient and effective health care system. Today’s buzz word is artificial intelligence, or AI. Health care is still looking to identify areas where AI can make an impact on both efficiency and effectiveness.

The conversations around payment models have also changed over the decades. Managed care brought payment models to the forefront as an alternative to fee-for-service. It was not the first time that capitation was used. Pierce County Industrial Medical and Surgical Service Bureau was established in 1917 and Kaiser Permanente was established in 1945 as prepaid and capitated health systems. That being said, capitation became more widespread as the managed care industry expanded in the 1980s and 1990s. The model of capitation was found to have its challenges, and many of those groups disbanded or went back to a fee-for-service model. Some of those that survived still exist today. In fact, they tend to be the organizations that have found a way to thrive outside of the fee-for-service models. Today you rarely hear the term capitation. More commonly, the terms value-based contracting or risk contracting are used. The early capitation models had less data available to them than organizations do today. It will be interesting to see whether appropriate use of data can increase the survival rates of these organizations.

Finally, another trend is corporate medicine. As I shared, health care is cyclical. This is the third time in my health care career that consolidation and the corporatization of health care has occurred. As I said before, Pierce County Industrial Medical and Surgical Service Bureau and Kaiser Permanente were both established prior to my career in health care. The Health Maintenance Organization Act of 1973 brought the first modern-day corporatization of health care as well as the beginning of the for-profit health care movement. From the early 1980s through the 1990s, there was significant proliferation of organizations that integrated the financial, the clinical, and employed health care professionals. I had the opportunity to spend from 1984 to 1996 in a staff-model health maintenance organization that started regional and then went on to become national. Many of these organizations were dismantled during the 1990s. The second wave occurred in the mid- to late 1990s with organizations such as Phycor and MedPartners. These 2 physician practice management organizations were the darlings of Wall Street. Most people do not know that at one time Caremark (now part of CVS Health) was the largest employer of physicians in the country. This era ended in 1998 when the merger of the 2 organizations fell apart. We now fast forward to today’s version of corporate medicine, where 75% of health care providers are employed. Many of the opportunities and challenges associated with corporate medicine in the 1980s continue today.

AJMC: What changes do you see taking place in managed care over the coming years?

BERGER: My first response to this question is that we need to define managed care in today’s environment. Do we define managed care as a financial term for care or a clinical term? That would help me answer the question. Broadly, I see several changes that are taking place: consolidation; profit over patient; value-based relationships; data, analytics, and AI; technology; medications and biotech; and trust and misinformation. All these areas as well as others can impact what takes place over the next few years. Each can have an influence.

AJMC: In a 2007 article, you wrote that “fairly small changes in pharmacy benefits can have a significant impact on overall health care costs,” referencing Pitney Bowes’ experience with diabetes management.¹ Since then, where have employers or other payers made progress on tweaking their benefits to optimize health care? Where is there room for improvement?

BERGER: Pitney Bowes and other employers like them led the way in addressing the clinical, financial, and humanistic impact of chronic disease. In this case, the company integrated disease management with financial incentives to support patients with chronic illnesses such as heart disease and diabetes. They found that this model brought long-term value to both the employee (patient) and the employer (the payer). Unfortunately, this plan design did not survive. Today, plan designs are much more focused on short-term value and less on clinical value. Over the last couple of years, I have been very vocal on the negative impact of plan designs and formulary decision-making by employers and health plans. These plan designs have little clinical foundation, bring little value to the patient, and are more focused on short-term financial impact for the payer and the pharmacy benefit manager middlemen. Pharmacy and pharmaceuticals have changed lethal, chronic, and acute medicine significantly over the last 20 years. Diseases that were lethal such as cancer and HIV have become chronic. Diseases that are genetic and had significant impact on cost and one’s life now can be treated. It is a good time to have a bad disease. Unfortunately, we are not using some of the scientific tools such as personalized medicine, pharmacokinetics, and precision medicine to bring the long-term value that is possible. We are still caught in a unit-cost mindset. This is in stark contrast to the conversations that we have on value today.

AJMC: In a 2018 article, you and colleagues provided recommendations for improving value frameworks with real-world patient outcomes.² Do health care decision makers adequately weigh what’s important to patients, and if not, how can we start?

BERGER: I have spent a great deal of my career focused on consumer behavior and health care/consumer dynamics. If I take a step back and look at this from a 30,000-foot vantage point, I notice a progression of how health care interacts with the consumer. Early in my career, medical decision-making was done by the physician based on the individual clinical attributes of the patient. It was one-off experiential medicine that was practiced. We were trained on an apprenticeship model to practice medicine. In the 1980s we began to use national guidelines. This was the basis to population medicine and disease management. We were trained on the 80% rule. We treated our patients with the assumption that they were all part of the 80%. Although we began to include the patient in the discussion, we still leaned heavily on what we as physicians and the health care industry thought was best. We are entering an era where precision and personalized medicine better integrates with the world of population health. We are early in this period.

I find interesting changes in real value frameworks to include all stakeholders. I would argue that there is a great deal of discussion about consumer-focused health care and not a great deal of action. I have seen 2 examples of organizations that have walked the talk on consumer value creation in health care. Quantum Health and Oak Street Health. What makes these 2 organizations similar is that they both look to provide broad support for the patient and their family including the clinical, financial, and life activities. They both bring the patient and their families into the decision-making process. We are beginning to see areas where AI can be used to better integrate life and health. Organizations such as Laguna Health and Pager Health are working with several health plans to do this.

We are not yet in a time where AI, precision, personalization, and the patient voice are being used by health care decision makers. These tools have the potential to maximize value to the patient and to society. Unfortunately, we have a health care system in the US that is focused on short-term value. Incentives are not aligned in the US model today. There are places such as Medicare, the Department of Veterans Affairs, and the Department of Defense where long-term value is valued. These areas should become our laboratories. In addition, there are still some employers that see their employees as investments and not cost centers and are using some of these tools. These are the companies that partner with organizations such as Quantum Health, Accolade, and Transcarent to both support their employees and find value for the employer as the payer.

References

1. Berger J. Economic and clinical impact of innovative pharmacy benefit designs in the management of diabetes pharmacotherapy. Am J Manag Care. 2007;13(suppl 2):S55-S58.

2. Jena AB, Chou JW, Yoon L, et al. Understanding and improving value frameworks with real-world patient outcomes. Am J Manag Care. 2018;24(11):506-509.