Managed care plans


Managed care plans are health-care delivery systems that integrate the financing and delivery of health care. Managed care organizations generally negotiate agreements with providers to offer packaged health care benefits to covered individuals.


The purpose for managed care plans is to reduce the cost of health care services by stimulating competition and streamlining administration.


A majority of insured Americans belongs to a managed care plan, a health care delivery system that applies corporate business practices to medical care in order to reduce costs and streamline care. The managed care era began in the late 1980s in response to skyrocketing health care costs, which stemmed from a number of sources. Under the fee-for-service, or indemnity, model that preceded managed care, doctors and hospitals were financially rewarded for using a multitude of expensive tests and procedures to treat patients. Other contributors to the high cost of health care were the public health advances after World War II that lengthened the average lifespan of Americans. This put increased pressure on the health care system. In response, providers have adopted state-of-the-art diagnostic and treatment technologies as they have become available.

Managed care companies attempted to reduce costs by negotiating lower fees with clinicians and hospitals in exchange for a steady flow of patients, developing standards of treatment for specific diseases, requiring clinicians to get plan approval before hospitalizing a patient (except in the case of an emergency), and encouraging clinicians to prescribe less expensive medicines. Many plans offer financial incentives to clinicians who minimize referrals and diagnostic tests, and some even apply financial penalties, or disincentives, on those considered to have ordered unnecessary care. The primary watchdog and accreditation agency for managed care organizations is the National Committee for Quality Assurance (NCQA), a non-profit organization that also collects and disseminates health plan performance data.

Three basic types of managed care plans exist: health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) plans.

Several managed care theories such as those stressing continuity of care, prevention, and early intervention are applauded by health care practitioners and patients alike. But managed care has come under fire by critics who feel patient care may be compromised by managed care cost-cutting strategies such as early hospital discharge and use of financial incentives to control referrals, which may make clinicians too cautious about sending patients to specialists. In general, the rise of managed care has shifted decisionmaking power away from plan members, who are limited in their choices of providers, and away from clinicians, who must concede to managed-care administrators regarding what is considered a medically necessary procedure. Many people would like to see managed care restructured to remedy this inequitable distribution of power. Such actions would maximize consumer choice and allow health care practitioners the freedom to provide the best care possible. According to the American Medical Association, rejection of care resulting from managed care stipulations should be subjected to an independent appeals process.

The health-care industry today is dominated by corporate values of managed care and is subject to corporate principles such as cost cutting, mergers and acquisitions, and layoffs. To thrive in such an environment, and to provide health care in accordance with professional values, health care practitioners must educate themselves on the business of health care, including hospital operations and administrative decision making, in order to influence institutional and regional health-care policies. A sampling of the roles available for registered nurses in a managed care environment include:

Normal results

It is difficult to predict the effect of the managed care revolution on the health care profession. All health care providers will benefit from building broad coalitions at the state and federal levels to publicize their views on patient care issues. These coalitions will also be useful to monitor developing trends in the industry, including the impact of proposed mergers and acquisitions of health care institutions on the provision of care.

See also Finding a surgeon ; Long-term insurance ; Medicare ; Nursing homes .



Bondeson, W. B., and J. W. Jones. Ethics of Managed Care: Professional Integrity and Patient Rights. Amsterdam: Kluwer Academic Publishers, 2002.

Kongstvedt, P. R. Essentials of Managed Health Care, 4th Edition. Boston: Jones & Bartlett, 2003.

Kongstvedt, P. R., and W. Knight. Managed Care: What It Is and How It Works, 2nd edition. Boston: Jones & Bartlett, 2002.

Orin, Rhonda. Making Them Pay: How to Get the Most from Health Insurance and Managed Care. New York: St. Martin's Press, 2001.


Kirkman-Liff, B. "Restoring Trust to Managed Care, Part 1: A Focus on Patients." American Journal of Managed Care 9, no.2 (2003): 174–180.

Kirkman-Liff, B. "Restoring Trust to Managed Care, Part 2: A Focus on Physicians." American Journal of Managed Care 9, no.3 (2003): 249–252.

Rogoski, R. R. "Managed Care's Challenges. Health Plans Use New IT to Meet the Burgeoning Challenges of Costs and Consumerism." Health Management Technology 24, no.3 (2003): 20–25.

Sparer, M. S. "Managed Long-term Care: Limits and Lessons." Journal of Aging and Health 15, no.1 (2003): 269–291.


Agency for Health Care Research and Quality. 2101 E. Jefferson St., Suite 501, Rockville, MD 20852. (301) 594-1364.

American Association of Managed Care Nurses. P.O. Box 4975, Glen Allen, VA 23058-4975. (804) 747-9698. .

American College of Physicians. 190 N. Independence Mall West, Philadelphia, PA 19106-1572. 800) 523-1546, x2600, or (215) 351-2600. .

American College of Surgeons. 633 North St. Clair Street, Chicago, IL 60611-32311. (312) 202-5000; Fax: (312) 202-5001. E-mail: .

American Hospital Association. One North Franklin, Chicago, IL 60606-3421. (312) 422-3000. .

American Medical Association. 515 N. State Street, Chicago, IL 60610. (312) 464-5000. .

American Nurses Association. 600 Maryland Avenue, SW, Suite 100 West, Washington, DC 20024. (800) 274-4262. .

Center for Bioethics at the University of Pennsylvania. Suite 320, 3401 Market Street, Philadelphia, PA 19104-3308. (215) 898-7136. .

National Committee for Quality Assurance. 2000 L St. NW, Washington, DC 20036. (202) 955-3500. .


American Academy of Pediatrics. [cited March 24, 2003]. .

Centers for Medicare & Medicaid Services. [cited March 24, 2003] .

National Committee for Quality Assurance. [cited March 24, 2003] .

Pennsylvania Health Law Project. [cited March 24, 2003] .

L. Fleming Fallon, Jr, MD, DrPH

User Contributions:

Managed care info is very useful while working with these plans.............
what is rate contract? and procedure of rate contract?

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