Managed Care/MCOMany people who talk about managed care  / MCO don’t realize that it has actually been undergoing a bit of a renaissance since the late 1980s – and has existed conceptually since the ‘30s.

Since the late ‘80s, MCOs have progressed through several phases:


Phase 1: Using utilization review and pre-admission certification to manage access to care.


Phase 2: The addition of fee-for-service networks and managing benefits.


Phase 3: Shift from utilization review to utilization management with an emphasis on the ‘appropriateness’ of care as well as the care setting.


Phase 4: The current phase of MCO development, which has only started in the last couple of years, looks at establishing a continuum of services, lessening the tendency for providers to operate in ‘silos’ which has been the dominant structure of healthcare in the U.S. for years.



At this point in the game, all but three states in the union have operational managed care programs in place. The three that don’t (Alaska, Wyoming and New Hampshire) may be well on their way to establishing them. Managed care is still regional in terms of which phase of implementation. Some areas of the country may be farther along in the process than others, so does that fact also match up with measurable health outcomes?


While, historically, managed care is succeeding in keeping costs down, but generally by limiting patient’s access to care. By keeping patients in certain provider networks, it follows that costs would be capped. The reality is, patients are unique and their needs are becoming more complex now that the baby boomer generation has aged into retirement. Not only are patients sicker, but there are more of them to manage.


Managed care also greatly reduced individual physician’s earning power and autonomy, meaning it hasn’t been particularly popular among physicians. One facet of managed care, utilization review, routinely asks that physicians to defend their medical decision making through documentation and billing procedures, and the second-guessing can make even the most confident physician feel that their skills are being constantly brought into question. Physicians have also seen a progressive decrease in annual salary, which has remained a bone of contention. It’s no longer largely practical for physicians to remain independent and many feel pushed into group practice settings just to offset the overhead required to keep a practice – any kind of practice- running.


Patients, on the other hand, haven’t been thrilled with managed care either. It limits their options in terms of choosing a doctor who will be covered by their insurance, they felt that physicians were at times prioritizing their earnings over providing care for the patients (such is life where capitation is concerned) and many patients feel they have no rights at all.


It might be difficult to visualize any distinct changes in managed care unless you look at the statistics – progress is being made, but perhaps not in the direction we’d hoped when the changes began twenty years ago.



MCO | Where We’ve Been, Where We Are & Where We’re Going


  • Twenty years ago, Americans spent nearly $558 billion on healthcare. Today, that number has surpassed $2.9 trillion. If the trend continues this way, by 2017 we’re expected to be spending upwards of $4.3 trillion on healthcare annually.
  • Twenty years ago, we spent $40.3 billion on prescription drugs. Today, we’re spending $188.5 billion. If the trend continues, by 2015, we’re projected to be spending $446.2 billion.
  • The average price of a perscription twenty years ago? $22. Today, the average price has jumped to $75. If the trend continues this way we can expect them to continue to increase, maybe even making it over the $100 mark.
  • The breakdown on how we pay for healthcare has changed, too.
    • Twenty years ago, the breakdown looked like this:
      • Government — 41%
      • Private insurers — 38%
      • Individuals — 21%
    • Today, the breakdown in payment looks more like this:
      • Government — 46%
      • Private insurers — 42%
      • Individuals — 12%
    • By 2017, it could look more like this:
      • Government — 49%
      • Private insurers — 41%
      • Individuals — 11%


A major determining factor in whether or not we will fall to these projections will be the assimilation of ACOs, the adoption of new value-based payment methods and the continued influence of healthcare IT on workflows.