Markets at Risk— Current and Future Challenges in a Managed Care Marketplace. F. Managed care organizations will continue to suffer from lack of legitimacy to do the difficult tasks asked of them.


The situation for health plans can be aptly juxtaposed with the resurgence of providers through their new forms of consolidation. It is as though the revolution has moved through counter-revolution and now on to a restoration, to again borrow from the political realm. Health plans have simply not been able to establish themselves as the legitimate rationers of medical care, or rationalizers of medical care consumption. For many of them this was never their aim, as evidenced by the top level executive in one of the national commercial companies who once characterized the managed care industry as being analogous to the travel agent industry: it exists to add value by simply brokering and facilitating the link between consumers and service delivers (see Figure 3). Such perceptions may never have been shared by some of the original prepaid group practice plans, but they too have been drawn into this industry by design or association.

The current controversy over health plan liability manifests this continuing struggle to identify if and how health plans/managed care organizations add value by what do, in any way other than through their decisions about coverage and compensability. The minimalist view as embraced by the industry has been justified as necessary to avoid being drawn in the mindless lottery-like morass of tort liability. But an alternative view holds that not only would liability promote a stronger sense of accountability and commitment to quality improvement, but it would reduce the likelihood that the managed care industry will marginalize itself as it seems to have succeeded in doing70. Consequently, if health plan liability were to become a clear reality, then it is reasonable to expect that many current managed care organizations would quickly retreat to the more modest roles of claim processing insurance companies and third party administrators. This situation would leave a relatively small number of HMOs in operation to fill what would be a narrow HMO niche.

  1. M. Jennings, “The Perils of Direct Contracting,” Healthcare Financial Management, pp: 43-45, December 2000.