SOURCE: The Boston Consulting Group

August 29, 2007 12:14 ET

Medical Management Retakes Center Stage on Strategic Agenda of U.S. Health Plans

BOSTON, MA--(Marketwire - August 29, 2007) - Today's health plans are rapidly reinventing themselves, emerging with more power, greater sophistication, and surprisingly deep ambition to transform their environment. The term "managed care" is rarely heard, and "health insurance" seems increasingly inappropriate terminology for describing the industry that organizes U.S. health care delivery: many contracts have little relationship to insurance functions. At the core of these changes, insurers are taking a fresh view of medical management for responding to the pressures. In its new report "The Emerging World of Medical Management I: New Levers and New Strategic Choices," The Boston Consulting Group (BCG) examines the rapid evolution of medical management at private health plans, as well as the new tools and strategies that plans are using to gain competitive advantage.

Very broadly, medical management aims not only to contain health care costs but also to improve health care quality by improving decision making and changing the behaviors of physicians, other providers, and patients. "Our research shows that in recent years, health plans have begun to dramatically expand their capabilities in medical management," says David Matheson, a BCG senior partner and managing director and an author of the report. "The health plans all see the promise of medical management," he continues, "but they differ markedly on how best to realize that promise and capture the benefits."

Today's portfolio of medical management tools is the culmination of three generations of innovation: tools that involve direct interventions with providers (for example, utilization management and prior authorization); those involving direct intervention with patients (including disease management, total population management, and wellness programs); and more recently, those deploying new incentives and information flows to improve the decision making of providers and patients (for instance, electronic health records, pay-for-performance bonuses, and rewards for adopting healthier lifestyles). "We see a number of these third-generation tools being piloted more widely now," says Anne Wilkins, a BCG partner and managing director and another of the report's authors. "But to maximize the benefits of medical management, health plans must fully integrate medical management into their operations. Ideally, this means integrating data, integrating functions, and integrating health care delivery," she adds.

"The health plan landscape has been very unsettled lately," Matheson explains. "How well the plans survive and thrive over the next five to seven years will be determined largely by the medical-management strategies they adopt today. And as there are substantial uncertainties surrounding these strategies, the pressure is on." He continues, "Payers will find themselves in a race to demonstrate impact. The winners will be those who prove best at managing the multiple drivers of cost and quality. It's going to be a difficult balancing act."

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