Managed Care and the Delivery of Primary Care to the Elderly and

Managed Care and the Delivery ofPrimary Care to the Elderly and theChronically IllDouglas R. Wholey, Lawton R. Burns, and Risa Lavizzo-Mourey

Objective. To analyze primary care staffing in HMOs and to review the literature onprimary care organization and performance in managed care organizations, with anemphasis on the delivery of primary care to the elderly and chronically ill.Data Sources/Study Setting. Analysis of primary care staffing: InterStudy HMOcensus data on primary care (n = 1,956) and specialist (n = 1,777) physician staffinglevels from 1991 through 1995. Primary care organization and performance for thechronically ill and elderly were analyzed using a review of published research.Study Design. For the staffing-level models, the number ofprimary care and specialistphysicians per 100,000 enrollees was regressed on HMO characteristics (HMO type[group, staff, network, mixed], HMO enrollment, federal qualification, profit status,national affiliation) and community characteristics (per capita income, populationdensity, service area size, HMO competition). For the review of organization andperformance, literature published was summarized in a tabular format.Principal Findings. The analysis of physician staffing shows that group and staffHMOs have fewer primary care and specialist physicians per 100,000 enrollees thando network and mixed HMOs, which have fewer than IPAs. Larger HMOs use fewerphysicians per 100,000 enrollees than smaller HMOs. Federally qualified HMOshave fewer primary care and specialist physicians per 100,000 enrollees. For-profit,nationally affiliated, and Blue Cross HMOs have more primary care and specialistphysicians than do local HMOs. HMOs in areas with high per capita income havemore PCPs per 100,000 and a greater proportion of PCPs in the panel. HMOpenetration decreases the use of specialists, but the number of HMOs increases theuse of primary care and specialist physicians in highly competitive markets. Undervery competitive conditions, HMOs appear to compete by increasing access to bothPCPs and specialists, with a greater emphasis on access to specialists. The reviewof research on HMO performance suggests that access to PCPs is better in MCOs.But access to specialists and hospitals is lower and more difficult in MCOs than FFS.Data do not suggest that processes of care, given access, are different in MCOs andFFS. MCO enrollees are more satisfied with financial aspects of a health plan and lesssatisfied with other aspects of health plan organization. There are potential problemswith outcomes, with some studies finding greater declines among the chronically illin MCOs than FFS. We found a variety of innovative care programs for the elderly,based on two fundamentally different approaches: organization around primary care

322

Primary Care: the Elderly and Chronicaly Il

or organizing around specialty care. Differences between the performance of the twoapproaches cannot be evaluated because of the small amount of research done. It isdifficult to say how well particular programs perform and if they can be replicated.The innovative programs described in the literature tend to be benchmark programsdeveloped by HMOs with a strong positive reputation.Key Words. Health maintenance organizations, primary care, physician staffing,chronic illness, elderly

There has been growing public and private sector interest in the role thatmanaged care may play in the delivery of healthcare services to the elderly.In the wake of the failed Clinton healthcare plan, the federal governmentnow views managed care and the private marketplace as one of the bestavailable solutions for controlling the escalation of healthcare costs andproviding quality care to its beneficiaries. As one illustration, the HealthCare Financing Administration recently issued the first report from its LongTerm Care Initiative, which had focused partly on the role of new managedcare models for delivering services to patients with long-term care needs(Health Care Financing Administration [HCFA] 1995). Indeed, over thepast few years, HCFA has been actively funding demonstrations of servicedelivery models that integrate acute and long-term care services under fullyor partly capitated risk arrangements. These demonstrations include socialHMOs, the Program for All-Inclusive Care for the Elderly (PACE), and theCommunity Nursing Organization (CNO). And the Balanced Budget Act of1997 authorized direct contracting between the Medicare program and PSOs(provider service organizations) (Hudson 1996).

Within the private sector, providers have expressed increasing interestin developing managed care organizations (MCOs) to attract the elderly. Theinterest in elderly enrollment has been spurred by the competitive desireto increase market share and enter new markets, the search for possibleeconomies of scale and scope (cf. Wholey, Feldman, and Christianson 1995;

Douglas Wholey, Ph.D., is Associate Professor of Organization and Information Systems, De-partment of Social and Decision Sciences, Carnegie Mellon University. Lawton R Burns, Ph.D.,M.B.A. is an Associate Professor, Department of Health Care Systems, The Wharton School,University of Pennsylvania. Risa Lavizzo-Mourey, M.D., M.B.A. is Director, Institute on Agingand Chief, Division of Geriatric Medicine, University of Pennsylvania. This article, submitted toHealth Services Research on April 17, 1997, was revised and accepted for publication on October17, 1997.

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324 HSR: Health Services Research 33:2 (June 1998) Part II

Given 1996), as well as anticipation of Medicare reform. Currently, only asmall percentage of the elderly are enrolled in MCOs, but that figure is risingquickly.

Given these developments and our nation's growing reliance on man-aged care, it is essential for both Medicare policymakers and researchersto understand the effect of managed care arrangements on primary careprovision because managed care relies on primary care more than does thefee-for-service system. Primary care providers perform a gatekeeper role,have continuing involvement with patients, and are ideally located to under-stand how a patient's social context relates to health and healthcare needs(Starfield 1992; Donaldson et al. 1996, referred to throughout as IOM). Thegatekeeper role carries implications of managing, and potentially reducing,access. Continuity and understanding of the social context carry implicationsfor developing innovative programs to meet the needs of the elderly and thechronically ill.

Our review focuses on three areas of the organization of medical care.First, we describe primary care and analyze the determinants of primarycare staffing within medical care organizations (MCOs). Second, we examinethe performance of MCOs in delivering healthcare, particularly primaryhealthcare, to those most at risk: the elderly and the chronically ill. Thenwe examine the ways in which MCOs are dealing with continuity of care andattentiveness to social context by reviewing some of the innovative programsthat have been developed to provide primary care to the elderly.

MANAGED CARE AND PRIMARY CARE

The term managed care organizations (or MCOs) refers to health plans thatuse a variety of management tools, such as second opinions, preadmissioncertification, and utilization review to manage healthcare delivery. ExamplesofMCOs include preferred provider organizations (PPOs) and health main-tenance organizations (HMOs).

Physician organization and financial incentives are commonly used todifferentiate between types of MCOs. Whether physicians are organized inmultispecialty group practices (MSGs) or in independent or small single-specialty practices is a key difference in the organization ofMCOs (Wolinskyand Marder 1985; Welch, Hillman, and Pauly 1990; Weiner and deLissovoy1993; Gold et al. 1995; Greenfield et al. 1992; Kravitz et al. 1992). MSGs andphysicians organized in independent practice differ in the amount of organi-zational constraints on providers, that is, "the degree that the various health

Primary Care: the Elderly and Chronically Ill

components in anHMO are structurally integrated into one functional healthcare system" (Wolinsky and Marder 1985; see also Wholey and Bums 1993,for an analysis ofHMO forms). MSGs have high organizational constraints(e.g., interaction with colleagues and medical directors, use of formulariesand guidelines, committee meetings, and so on), while independent practicephysicians have low organizational constraints. At the organizational levelamong HMOs, this difference between MSGs and independent practice isreflected in the group HMO-IPA (independent practice association) distinc-tion. Recently, hybrid and mixed HMOs that combine both forms havebecome more common.

Financial incentives and risk distribution are the other common clas-sification method (Hillman, Welch, and Pauly 1992; Weiner and deLissovoy1993; Gold et al. 1995). Two key issues in risk arrangements are the amountof risk that providers accept and ways that the risk is pooled among physi-cians (Hillman, Welch, and Pauly 1992). The most common method ofshifting risk to providers is capitation, paying physicians a fixed amountper patient per unit time to deliver a specified set of healthcare services.MCOs can capitate providers in a tiered arrangement, whereby MCOscapitate a physician organization, which in turn reimburses individual physi-cians. Alternatively, MCOs can capitate individual physicians. Shifting riskto physicians may have adverse affects on access to care and thus on out-comes.

PRIMARY CARE

Primary care is a key component ofmanaged care. The IOM defines primarycare as "the provision of integrated, accessible health care services by clini-cians who are accountable for addressing a large majority of personal healthcare needs, developing a sustained partnership with patients, and practicingin the context of family and community" (IOM 1996). Following the IOM,we assume that "primary care refers to health services provided to individualsrather than community oriented public health services because collapsing thetwo obscures the analysis of each" (IOM 1996).

The definition highlights anumber ofimportant elements. First, primarycare providers (PCPs) are often the initial contact points for healthcare con-sumers. Second, as initial contacts, PCPs perform a gatekeeper role, managinga consumer's access to the healthcare system. This can be interpreted eitheras containing costs by limiting access (e.g., denying requests for specialist

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referrals) or as managing appropriate healthcare, by guiding consumers tothe correct specialists. Third, primary care practice occurs within a socialcontext.

A PCP's position as initial contact leads him or her to observe a widerange of conditions for a particular patient over an extended period of time.Starfield (1992) refers to these dimensions as comprehensiveness, longitudi-nality, and continuity. Comprehensiveness refers to the variance in types ofproblems aPCP observes in a patient. This is determined in part by the healthinsurance plan's benefit structure, by organizational structures (e.g., requiringconsumers to obtain a PCP's approval before seeing a specialist), and by aconsumer's preference for self-referring to specialists. Longitudinality refersto the ongoing personal relationship between a PCP and a patient. Longitu-dinality is considered an important component in a patient's perceptions ofcaring and trust (Starfield 1992; Scott et al. 1995). Longitudinality is associatedwith continuity of care, which is the integration of information necessary totreat a patient across time and across healthcare problems.

Comprehensive care, longitudinal relationships, and continuity of caregenerate a substantial amount of information. This implies a need for coor-dination of care by combining diverse pieces of information. Chapter 6 ofStarfield (1992) shows that information is often fragmented and localized inhealthcare delivery. For example, communication between referring physi-cians and specialists is often incomplete. The opportunity to see the same PCPconsistently, which may at least minimize the need to transfer informationbetween providers, varies substantially across healthcare settings. Some ofthe mechanisms developed to ensure that information transfer does take placeinclude primary care teams, which are responsible for particular patients, andinformation technology, which can be used to maintain an easily accessibleelectronic patient record.

DETERMINANTS OF PRIMARY CARESTAFFING WITHIN MCOS

A key component of primary care provision is the level of PCP staffing.Little is known about the determinants of differences across MCOs in theirPCP staffing levels (referred to as "right sizing" of the PCP component, cf.Begun and Luke 1996). There is a greater proportion of PCPs in HMOphysician networks than in the population of all physicians (Weiner 1994).Researchers have examined staffing patterns in HMOs, with primary care

P^imary Care: the Elderly and ChronicaUy

staffing, including PCPs, physician assistants, and nurse practitioners (seeScheffler 1996 for a literature review and analysis of staffing patterns in twostaff type HMOs). Many of these studies have focused on only small samplesofHMOs and have not examined the effect of HMO characteristics, HMOcompetition, and community characteristics on PCP staffing. We extend thesestudies by examining the determinants of physician and specialist staffingamongHMOs using national HMO survey data from 1991 to 1995 (InterStudyEdge 1991-1995).

As part of their annual survey, InterStudy obtains data on the totalnumber of primary care and specialist physicians affiliated with each HMO.These statistics differ from those used by Weiner who relies on the number offull-time equivalent (FTE) physicians. While the number ofFIE physicians isimportant for workforce projections, the total number of affiliated physiciansis preferred as a structural measure of physician accessibility. Table 1 showssignificant differences in the number of primary care and specialist physiciansper 100,000 enrollment by HMO size and HMO type. Larger HMOs havefewer physicians per 100,000 enrollees, while IPA HMOs have the greatestnumber ofphysicians per 100,000 enrollees. However, the percentage ofphysi-cians who are PCPs is relatively constant at around 30 percent across size andtype categories.

Table 2 analyzes the determinants of physician staffing within HMOs.Since the sample consisted ofHMOs appearing from one to five years, a ran-

Table 1: Physicians per 100,000 Enrollees and Percentage PrimaryCare Physicians by Physician Type, HMO Type, and Enrollment

Group/Staff Network/Mixed IPA

Pnimary Care Physicians per 100,(000 enroUees0-50,000 385 1015 143751,000-100,000 146 736 998>100,000 128 618 729

Specialist Physicians per 100,000 enrolles0-50,000 948 1993 276351,000-100,000 405 1889 1895>100,000 332 1233 1484

Percentage Primary Care Physicians0-50,000 29.4 31.3 29.851,000-100,000 28.5 31.2 31.8>100,000 34.1 31.7 32.2

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328 HSRP Health Services Research 33:2 (June 1998) Part II

Table 2: Determinants of Primary Care and Specialist PhysicianStaffing and Percentage of Primary Care Physicians in HMOs

P1imaty Care Seciaits hporton lmaryEstimate t-Statishc Estimate t-Statitic Estimate t-Statistic

HMO Type and EnrolmenttGroup (=1) -644.31** -8.07 -988.48** -7.05 -3.81** -2.6Staff (=1) -754.68** -8.88 -1168.68** -7.93 -1.67 -1.07Group/Staff* -29.37** 6.82 41.64** 5.09 0.05 0.65

(1/ Enrollment)Group/Staff* -21.72 -1.83 -46.38* -2.32 0.30 1.67

EnrollmentNetwork (=1) -413.73** -5.32 -613.11** -4.30 -2.14 -1.39Mixed (=1) -471.59** -7.10 -685.56** -5.60 -1.63 -1.23Network/Mixed* 62.77** 6.41 11 1.41** 5.25 0.46* 2.02

(1/ Enrollment)Network/Mixed* -67.27** -3.40 -124.10** -3.68 0.09 0.27

EnrollmentIPA* 35.48** 10.90 57.41** 8.33 0.02 0.3

(1/Enrollment)IPA*Enrollment -227.56** -9.22 -353.69** -8.53 -0.29 -0.66

HMO and Community FactorsFederally qualified -120.88** -2.71 -258.32** -3.27 -0.29 -0.37

(=1)For-profit (=1) -161.37** -2.88 401.04** 4.04 -2.34* -2.41National HMO, -156.45* 2.45 151.67 1.42 0.34 0.30HMO based (=1)

National HMO, not 264.62** 5.00 318.41** 3.50 -1.24 -1.30HMO based (=1)

Blue Cross (=1) 203.06** 2.95 407.25** 3.45 -3.09* -2.61Primary care 0.63 0.34 3.88 1.18 -0.05 -1.51

physiciansper 100,000population

Income per capita 31.16** 3.88 11.79 0.85 0.70** 4.73($1,000s)

Population densityi -15.39 -0.50 -58.84 -1.01 -0.58 -1.01Square miles of 0.38** 3.45 1.03** 4.96 0.00 0.56

service areasHMO penetration -304.46 -1.06 -1402.06** -2.84 23.01** 4.29Number ofHMOs 7.69 0.94 12.09 0.83 0.01 0.06Penetration* 58.45* 2.10 119.72* 2.42 -1.24* -2.33Number ofHMOs

Intercept 125.86 0.57 1258.58** 3.28 21.46** 5.34Number of 1956 1777 1764

observations

**p < .01; *p < .05.tMeasured in 100,000 $. *1,000s per square mile. §100s of square miles.

Primary Care: the Elderly and Chronically Il

dom effects error specification was used to control for HMO characteristicsthat were not included in the model. The construction of the independentvariables was done in the same manner as that reported in Wholey, Feldman,and Christianson (1995). The indicators forHMO type (group, staff, network,mixed; IPAs are the contrast) show differences due solely to HMO type. Theeffects for inverse of enrollment and enrollment show that the relationshipbetween enrollment and staffing varies as a nonlinear function of enrollment.The enrollment effect is the asymptotic line that describes the effect of size onstaffing in large HMOs. The inverse of enrollment effect allows for staffinglevels in smaller HMOs to be different. We allowed for differences betweenHMO types in enrollment effects by estimating the enrollment effects sep-arately for group and staff HMOs, for network and mixed HMOs, and forIPA HMOs.

The effects of HMO type show that group and staff HMOs havefewer primary care and specialist physicians per 100,000 enrollees than donetwork and mixed HMOs, which have fewer than IPAs. The negative effectof enrollment and physician staffing shows that larger HMOs use fewerphysicians per 100,000 enrollees than smaller HMOs. This effect is least forgroup and staff HMOs, moderate in size for network and mixed HMOs, andgreatest for IPAs. We cannot tell how much the effect is due to not addingphysicians as enrollment grows or to removing physicians from the HMO'spanel as the HMO matures.

Federally qualified HMOs have fewer primary care and specialist physi-cians per 100,000 enrollees. For-profit and Blue Cross HMOs have moreprimary care and specialist physicians. Since the effect is much larger forspecialists, for-profit and Blue Cross HMOs have a lower percentage of PCPson their panels. HMOs affiliated with national firms have more physiciansper 100,000 enrollees than do local HMOs. HMOs in areas with high percapita income have more PCPs per 100,000. This may be due to offeringconsumers greater PCP choice. The overall effect of per capita income is toincrease the proportion of PCPs in the panel.

HMO penetration decreases the use of specialists, causing a positiveeffect of penetration on the percentage of PCPs in the HMO's panel. Thiseffect is offset by the number of HMOs increasing the use of primary careand specialist physicians in highly competitive markets, with the increase inspecialists being greater than the increase in PCPs. In extremely competitivemarkets (high HMO penetration and a high number ofHMOs), the percent-age of PCPs is lower. This suggests that under very competitive conditions,

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HMOs appear to compete by increasing access to both PCPs and specialists,with a greater emphasis on access to specialists.

PRIMARY CARE CHALLENGES IN MCOSDUE TO MEDICARE ENROLLMENT

Caring for the elderly represents a challenge and an opportunity for organiz-ing primary care delivery in MCOs. The elderly are a heterogeneous popu-lation characterized by bodies that are undergoing the physiologic changesassociated with aging; a range of functional and cognitive capacities; multiplechronic diseases with their resulting therapies; and social situations that areoften in transition. While the changes in each of these areas are nonlinear,they do appear to be cumulative, making the problems and situations of thevery old (over age 85) more complex than those ofthe young old (ages 65-84).

Virtually every organ system in the body changes with age. Thesechanges are generally continuous rather than associated with a specific age.For example, bone loss is gradual, beginning at approximately age 30; musclemass decreases over the same time period; and there is a concomitant increasein the amount of body fat. Kidney function decreases approximately onepercent per year after age 30, resulting in a loss of half of its capacity byage 85. Similarly, the maximum ventilation achievable by the lungs and themaximum cardiac output measurable by the heart diminish steadily with age.These physiologic changes almost always result in a decrease in the amountof "reserve" that older persons have to fight threats to their well-being andcan limit their ability to complete routine activities.

Associated with the greater use of healthcare services and decreasingreserve is the greater prevalence of chronic conditions. Many older adults,particularly those over the age of 85, have multiple chronic conditions thatoften interact to create limitations in functional status-that is, disability.On average, older people have 3.5 medical conditions. The presence ofmultiple conditions suggests that the elderly will have substantial lateralneeds across providers. The most common conditions among those age 65-74 resulting in hospitalization include diseases of the heart, malignancies,cerebrovascular diseases, arthritis, pneumonia, diabetes, and eye conditions(largely cataracts). For those persons over age 75 the list is the same exceptthat bone fractures replace arthritis. The mostcommon conditions that plagueolder adults represent multiple organ systems and frequently require multipledisciplines and specialties for optimal treatment, supporting the notion thatthe elderly have considerable lateral needs.

Pimary Care: the Elderly and Chronically Ill

The consequence of health conditions often is disability or decreasedfunctional status. Of persons over the age of 65 with an income of more than$20,000 per year, 30 percent report having some limitations. Limitations ininstrumental activities of daily living are most common among the elderly.Approximately 20-24 percent of elders report having difficulty with andneeding assistance with one or more of the instrumental activities of dailyliving. For these people, greater reliance on family and social supports isrequired to avoid institutionalization. The best predictor of nursing homeplacements is the absence of a caregiver, highlighting the importance of thesocial supports in meeting the healthcare needs of the elderly.

For the elderly and those with chronic conditions, MCOs have theopportunity to integrate fragmented care, work with other actors in providinghealthcare in a patient's contextual setting, and allocate resources as a functionofthe needs ofindividuals with chronic conditions (Sandler and Gibson 1996).In fact, a number ofMCO programs for the chronically ill focus precisely oncontextual factors, such as providing transportation, makinghomes safer fromfalls, and providing respite for informal caregivers (Fox and Fama 1996; Sandyand Gibson 1996). MCOs may also have the opportunity to use informationtechnology for better coordination of patient care.

Unfortunately, MCO financial arrangements may not have a benign ef-fect. For example, manyHMOs use capitation as ameans ofpaying providers,particularly PCPs. Capitation is difficult to administer. Even with relativelysophisticated risk adjustment, capitation payments for patients with chronicconditions are consistently low (Fowles et al. 1996). This means that cap-itated providers will be systematically underpaid for patients with chronicconditions, a situation that can lead to underprovision of services. Capitationmay also lead physician groups to review overuse more than underuse and,in areas of underuse, to focus more on preventive services than on follow-up services for patients with chronic conditions (Kerr et al. 1996). Anothertroubling sign is that physicians are less satisfied with the quality of care theydeliver to capitated patients than to patients in their overall practice (Kerr et al.1997). But these adverse effects are offset in larger, older, and more profitablephysician groups, which devote more resources to quality assurance. In fact,physicians in large, heavily capitated, multispecialty practices were moresatisfied with the quality of capitated care than were most other physicians.

Restrictive HMO panels and physician turnover also may cause prob-lems for continuity and longitudinality. Research shows that change inHMO-physician relationships affects enrollment decisions (Sofaer and Hurwicz1993). For a patient who chooses to stay with an HMO, the changing panel

331


forces a change in patient-provider relationships. This is harmfiil to the de-gree that the patient's conditions require the maintenance of patient-specificinformation over time.

While the lack of effective information transfer and coordination forpatients with independent acute conditions-perhaps caused by disruptionsin provider-patient relationships-may not be very harmful, the lack of effec-tive coordination for patients with chronic conditions may be quite serious.Information about potential drug interactions, for example, is important forpatients with chronic conditions who are taking a variety of pharmaceuticals.The IOM uses continuity of care to refer to both the longitudinal and in-formational aspects of a physician-patient relationship. They argue that "thecontinuity that results from an ongoing relationship with clinicians who knowtheir patients and their patients' health histories ... open opportunities forpatients to disclose sensitive problems and for clinicians to discover favorablemoments to provide counsel and advice" (IOM 1996).

Thus, while MCOs may have the opportunity to provide better health-care, the possibility that healthcare-may be worse also exists. The next sectionreviews the research on MCO performance as it compares to research on theperformance of indemnity healthcare.

PERFORMANCE DIFFERENCES BETWEENINDEMNITY AND MCOS

Table 3 summarizes a number of studies on differences between MCOand fee-for-service in providing healthcare for chronically ill patients andMedicare patients (see also Miller and Luft 1994). While we focus on primarycare issues, we also include studies in acute care settings and studies ofyoungerpopulations (e.g., Medicaid) when they shed light on differences betweenMCO and FFS access, processes, outcomes, and satisfaction. Finally, we focuson studies reported in the 1990s.

The research on access to care shows that, compared to FFS, MCOshave higher rates of physician office visits and lower rates of hospitalization,drug prescription, and referral to specialists. MCO patients-particularlypatients with chronic conditions-are much more likely to report accessproblems than are FFS patients. Consistent with the access issue is evidence ofselection effects in choice of provider, with FFS solo or small single-specialtypractice physicians having an older, whiter, and more chronically ill mix

Primary Care: the Elderly and Chronically f 3

of patients. But, while there are differences in functional status, differencesas measured by tracer conditions are difficult to observe between FFS andMCO. These two different ways of measuring mix of patients (functionalstatus and tracer conditions) may be the source ofdifferences among observersaboutMCO-FFS differences in the prevalence ofpatients with chronic healthconditions.

A number of studies report no differences between MCOs and FFS inprocesses of care (e.g., Coffey et al. 1995; Greenfield et al. 1995; Monane et al.1996). Some report more attentiveness to processes of care (e.g., appropriateuse of procedures) in MCOs than in FFS (e.g., Preston and Retchin 1991;Retchin and Brown 1990). The diversity of results makes it difficult to drawany inferences about differences in processes of care in an MCO versus aFFS setting. Safran et al. (1994), though, do report some differences consistentwith the access findings. They evaluated primary care directly and found thatorganizational access and continuity were worse in MCOs, while financialaccess and coordination were better in MCOs. Although organizational ac-cess and continuity may be worse in MCOs, there may be no difference inthe performance of appropriate procedures.

Patient satisfaction results mirror access results. Patients in MCOs areless satisfied with access to specialists, hospitals, and prescriptions; with ob-taining information; and with quality of care. However, patients in MCOsare more satisfied with financial arrangements (e.g., Clement, Retchin, andBrown 1994).

Research on outcomes signals some potential problems. Lurie et al.(1992) found that among patients with chronic mental illness, health statusdeclined more over time in MCOs than in FFS. Among the elderly withchronic illnesses, Ware et al. (1996) report a greater decline in health status inMCOs than in FFS. But the Ware et al. article also reported that patients withmental illness improved more in MCOs than in FFS-due to the excellentperformance of one HMO.

We conclude that access to PCPs is better in MCOs than in FFS. Thismay be one source ofbetter coordination. Access to specialists and to hospitalsis lower and more difficult in MCOs than FFS. The data do not suggest,however, that processes of care, given access, are different between MCOsand FFS. MCO enrollees are more satisfied with the financial aspects of ahealth plan and are less satisfied with other aspects ofhealth plan organization.The research finds potential problems with outcomes, with some studiesfinding greater declines among the chronically ill in MCOs than FFS.

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I3,I.4- HSR: Health Services Research 33:2 (June 1998) Part II

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Some of the differences in findings may be due to the limited number ofMCOs usually studied, which may yield findings that are difficult to generalizefrom. And substantial diversity in performance exists across MCOs, withsome sophisticated MCOs doing an excellent job.

It is not clear how to interpret lower access to specialists and thelower rate of some procedures performed in MCOs relative to FFS. Oneinterpretation is that MCOs are skimping on providing appropriate care.An alternative view is that some procedures are being overperformed in thefee-for-service sector, perhaps due to over-referral or greater self-referral tospecialists among indemnity patients. The correct interpretation is unclearbetween over- and underperformance because the appropriate rate is oftenunknown. As Clement et al. (1994) point out about joint pain: "In manyinstances, no referral for these patients is appropriate. For instance, treatmentof mild to moderate cases of joint pain usually involves patient educationand' reassurance, physiotherapy, some lifestyle changes, and, often, drugtherapy." A PCP can perform these functions. Goldzweig et al. (1997) makea similar point in their study of cataract surgery: "Because there was noassessment of need for surgery across setting, we cannot determine whichrate is appropriate or whether some rates are too low and others too high."Retchin et al. (1997), in their study of care for stroke patients, state, "It isnot known whether the higher use of nursing homes and the lower rate ofrehabilitation facility use among HMO stroke patients represent a judicioususe of expensive resources or a withholding of necessary care." In sum, ourinability to distinguish appropriate from inappropriate care as explanationsforMCO and FFS differences is acommon refrain in discussion and commentsections.

Enrollment, disenrollment, and reenrollment in Medicare risk contractMCOs is a process strongly related to access and utilization differencesbetween MCOs and FFS. Research shows that Medicare HMO enrolleesare likely to remain in an HMO until they need a procedure, disenroll fromthe HMO and move to FFS to obtain the procedure, and then reenroll inan HMO after the procedure has been performed (Morgan et al. 1997). Thiswould cause the FFS procedure rate to be greater than the HMO procedurerate. This enrollment process can be interpreted in two ways: as a signalof inadequate or inappropriate care among MCOs, on the one hand, or,on the other hand, as a signal of a moral hazard problem among Medicarebeneficiaries representing beneficiary "gaming" of an institutional structure.An argument supporting the latter conclusion is that, if a Medicare beneficiaryhas disenrolled because the quality of care is extremely poor, then he or she

Primary Care: the Elderly and ChronicaUly Il

should not be expected to reenroll after obtaining the desired procedureselsewhere.

This MCO-FFS difference may be greater when the uncertainty aboutthe efficacy of a procedure is higher given certain indications. The greater theuncertainty, the less likely are patients in MCOs to obtain a procedure andthe more likely are patients in FFS to obtain it, given the same indications.This suggests that differences between MCOs and FFS will be minimalfor conditions where the relationship among indications, treatment, andoutcomes is well understood, and that differences between MCOs and FFSwill be substantial where this relationship is uncertain.

Care must also be taken in interpreting measures to select appropriatesubpopulations to study (Angell and Kassirer 1996). Many current MCOreport cards focus on population-level measures. Satisfaction measures forthe population of all MCO enrollees are likely to be relatively high becausemost enrollees are healthy. This overall high level of satisfaction may maskimportant differences within subpopulations. This is likely to be problematiceven when demographic subgroups (e.g., African Americans) are studied,because of self-selection into risk contracts (Nelson et al. 1997). Care must betaken to measure satisfaction and outcomes among those at greatest risk, thechronically ill.

Early published evaluations appear to show fewer MCO-related prob-lems than later evaluations. There may be two reasons for this. First, earlyevaluations of Medicare managed care relied on a relatively limited subsetof MCOs (as noted in Table 3, a number of the studies reported analyses ofthe same sample of MCOs). If this subset contained relatively sophisticatedand capable MCOs, the results may not be applicable to MCOs in general.Second, the differences may be due to overall levels of MCO competition.Some of the earlier evaluations that do show lower access among MCOpatients (e.g., Lurie et al. 1992) were done in well-developed MCO markets.

Although important, the reviewed studies do not directly address theimplied critique of managed care: that an emphasis on cost efficiency causesa decrease in quality of care. Although it is not a direct comparison betweenMCO and FFS, the Starfield et al. (1994) study of healthcare in primarycare settings among Medicaid beneficiaries sheds some light on differencesbetween costs and quality. Using a wide variety of quality measures, noconsistent relationship was found between cost efficiency (measured as low,medium, and high cost relative to cost in similar organizations) and qualityof care.

341


INNOVATIVE PROGRAMS FOR PRIMARYCARE IN MCOS

A variety of programmatic innovations have been set up for working withthe frail elderly and the chronically ill. Kramer, Fox, and Morgenstem (1992)studied seven HMOs that had high Medicare enrollment and an excellentreputation for developing innovative programs. They found that these bench-mark HMOs screen enrollees to locate high-risk patients, assess the healthstatus of these patients, do a geriatric assessment, manage the care for patientswith diverse problems, provide rehabilitative services, review medicationuse, and integrate long-term and home healthcare into service delivery. Inaddition to screening, assessment, and care management, these MCOs aremaking modifications to physical facilities to accommodate the special needsof the frail elderly (larger lettering on signs, railings, etc.). Although Kramer,Fox, and Morgenstem (1992) were able to describe these programs, data wereunavailable on program effectiveness.

Case management is often mentioned as an organizational program thatencourages the appropriate use of healthcare services. As with gatekeeping,however, case management has been subject to two interpretations (Starfield1992). The early interpretations focused on coordinating service deliverywithin a community so that all who needed the service could obtain it. Dueto a greater emphasis on cost-containment, more recent interpretations haveassociated case management with the efficient allocation of services, possiblyby restricting the services a patient has access to.

Case management includes the activities ofscreening (locating enrolleeswho are most likely to benefit from case management and assessing theirhealth status and needs); gathering information about the screened enrolleesand evaluating them for inclusion in the case management program; andmanaging their care (Pacala et al. 1995). A survey of 18 HMOs that hadMedicare risk contracts with at least 20,000 enrollees showed that the HMOsthat provided for these base functional areas varied in the degree to which theymanaged care (Pacala et al. 1995). All of the HMOs managed HMO coveredservices, but only 11 managed services provided by other organizations.The most common service provided was education, followed by assistingthe enrollee's family, assisting enrollee decision making, and home visiting.Cost-effectiveness, presumably occurring through a mechanism of improvedcoordination, was a primary goal of most plans; enrollee satisfaction was alsomentioned as a goal. Pacala et al. (1995) note that, although these plans arein operation, there has been little systematic evaluation of their performance.

Primary Care: the Elderly and Chronically IU

The Community Nursing Organization (CNO) demonstration fundedby HCFA is an example of case management that tests the influence of nurse-directed home health and community-based nursing case management onenrollees' use of home health and ambulatory care services. In one of thefunded sites, evaluation research evidence is already documenting reductionsin inpatient use and in costs for enrollees of a Medicare risk contract whoparticipate in this program (Lamb 1995; Bums, Lamb, and Wholey 1996). Inthis site, a nurse case manager is assigned to specific high-risk patients upontheir admission to a hospital; the nurse case manager then follows each patientand coordinates the patient's various health needs upon discharge backhome. The Social Health Maintenance Organization project used a servicecoordinator to help families and patients manage their use of healthcareservices (Leutz, Greenlick, and Capitman 1994).

Even separate from the case management program, the screening func-tion is useful. PacifiCare Health Systems, a California HMO, has taken thisapproach for helping its network of contracting physicians and hospitalsidentify and manage elderly patients at risk before they require nursinghome care or dialysis (Lumsdon 1995). PacifiCare screens elderly enrolleesby gathering information on early warning signs from the patients themselvesusing surveys on items such as health status. The HMO also conducts regularscreenings and has developed information technology to alert case managerswhen patients call with certain problems.

Some healthcare networks are developing liaison roles to integrate thecare rendered to high-risk, high-cost patients. At the Friendly Hills HealthcareNetwork, for example, such patients are never really discharged, but insteadare followed by a clinical nurse specialist (CNS) from one setting to anotheralong the care continuum. The CNS (1) receives referrals from physicians andother caregivers along the continuum; (2) conducts physical, psychosocial,and cultural assessments of the patient; (3) manages the care plan; and (4)arranges with outside agencies to reintegrate the patient into the community(Jacoby et al. 1995).

Another variant of "virtual" vertical integration now used to managethe chronic needs of the elderly is disease management (or disease statemanagement). Pharmaceutical firms are formulating disease managementprograms to develop strategic alliances with providers and to contract moreeffectively in capitated care arrangements (Anders 1995). Drug firms makeuse of several organizational vehicles to develop these alliances, includingthe purchase of pharmacy benefit managers (PBMs) or the establishment ofseparate subsidiaries (e.g., Eli illy's Integrated Disease Management Inc.).

343


Such programs seek to understand and improve the processes of care forchronic conditions (e.g., asthma, diabetes, cardiovascular disease, etc.), andto integrate these new models of understanding and treatment into managedcare plans or integrated delivery systems. These programs focus on theentire course of a disease, not just the disease components or the inpatientepisodes, and provide multidisciplinary patient management that cuts acrosscare settings (lateral perspective) and time (longitudinal perspective).

Case management, through screening, assessment, and care manage-ment, is not direct service provision. Some HMOs are developing programsaimed at producing services in new ways. Kaiser Foundation Clinics (prepaidgroup HMOs) has developed "cooperative care clinics" (Lumsdon 1995).As part of these "clinics," groups of 20-25 patients have monthly groupvisits with a care team consisting of their own physician and a nurse. Thevisits involve lengthy, in-depth group discussions between the physician andpatients, achieving some economies in the physician's use of time. The visitsalso include routine checkups and counseling on lifestyle habits, as well astime to speak with other relevant caregivers (e.g., pharmacists and therapists).Consequently, patients come to know their caregivers on a more personalbasis and are more likely to call the nurse (rather than the physician) regardingproblems that arise. Initial results suggest that the program reduces emergencyvisits, admissions, and length of stay. From a "caring" standpoint, the groupvisits also allow patients to counsel and communicate with one another. Giventhe fact that patients typically are experts in managing chronic conditions, thegroup visits provide a regular social support function and help to educate thecaregiver team as well.

Some HMOs are developing programs to provide care for the elderlyand chronically ill who are in nursing homes. Fama and Fox (1997) examinedprimary care health delivery programs for nursing home residents developedby Fallon Community Health Plan, EverCare (a subsidiary ofUnited Health-Care), Kaiser, and Group Health Care Cooperative of Puget Sound. TheseHMOs use PCP-geriatric nurse practitioner teams. In EverCare, the nursepractitioner does an initial evaluation of patients and reviews the evaluationwith the physician, the patient, and the patient's family. Then the nursepractitioner manages daily patient care while keeping the physician informedof the patient's condition.

Researchers have also identified a variety of structures for dealing withthe chronic conditions prevalent among the elderly. Wagner, Austin, and VanKorff (1996) group the strategies for managing chronic care into practice re-design, patient education, expert systems, and information. Practice redesign

Primary Care: the Elderly and ChronicaUy IU

involves identifying the primary caregiver and supporting that individualappropriately. They maintain that the options range from efforts to enhancethe usual primary care at one end to providing care by medical or otherspecialists at the other (Wagner, Austin, and Van Korff 1996). Although avariety of types of practice redesign have been found to be successful, a keyremaining issue is determining when each type of practice redesign is likelyto be most successful.

Oxford Health Plans has developed a fundamentally different approachto solving the service integration problem (Prager 1997). Case managementapproaches manage patient care across a wide variety of services in a largeorganization. Building on the idea of provider teams, Oxford Health Plans iscreating specialist teams in 11 areas such as behavioral health and cardiology(geriatric care was not mentioned as a specialist team area), and patients are re-ferred to the appropriate team. These focused teams are globally reimbursedfor all services related to the services needed in the area; team performance ismonitored through clinical report cards. The Oxford Health Plan approachcan be described as the logical extension of carve-outs to particular diagnoses,rather than as an approach to a broad areas such as all of mental health. Thisstrategy of using carve-out, specialist referral teams implicitly assumes thathealthcare problems are separable and independent; that is, a referral to abehavioral health team does not require the services of a cardiology team.

Our review illustrates a variety of innovative care programs for theelderly. There are two fundamentally different approaches. One is to use casemanagement to integrate a wide variety of healthcare services. A correlateof this approach is developing new service delivery mechanisms such asthe PCP-geriatric nurse practitioner team for nursing home care and thecooperative care clinic. The alternative is to use focused teams to provide anenrollee with all necessary healthcare services for a specific condition. Thesefundamentally different approaches can be characterized as care organizedaround primary care and care organized around specialty care.

It is difficult to say how well particular programs perform and whetherthey can be replicated. While there is some positive evidence on aprogram ba-sis, it is relatively limited. The innovative programs described in the literaturetend to be benchmark programs developed by HMOs with a strong positivereputation. In addition to being developed by excellent HMOs, some ofthese programs have had to obtain waivers from Medicare as a demonstrationproject. These benchmark HMOs may have the well-developed informationsystems that are necessary for the program development they have under-taken, but mostHMOs do not have the information technology infrastructure

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in place to support the screening and managerial functions that these innova-tive programs require (Wholey et al. 1997). Consequently, the technologicalsophistication of the HMOs that are developing these innovative programsand the necessity of waivers suggest that implementing these programs ona national scale will not occur very soon and that the results observed in ademonstration project may not generalize to other HMOs.

The review identified two basic organizing strategies-one focusing onprimary care and the other focusing on specialty care. The IOM assumptionthat "primary care is the logical basis ofan effective health care system" (IOM1996) may in fact be problematic. Weinberger, Oddone, and Henderson(1996) found mixed results for providing increased access to primary careamong veterans with chronic illnesses (diabetes, congestive heart failure, orobstructive pulmonary disease). Veterans receiving the primary care interven-tion were more likely to be hospitalized, were more satisfied with perceivedquality of care, and scored no differently in quality-of-life measures. Thissuggests that instead of assuming the importance of primary care, it maybe more beneficial to ask under what conditions and for what conditionsorganizing based on primary care will be more effective than specialty care-based options.

MCOS AND THE ELDERLY: CHALLENGESAND OPPORTUNITIES FOR IMPROVINGCARE

We have argued that enrolling the elderly will require MCOs to move tostructures more capable of serving patients with a wide range of conditionsthat continue over time. There will be heavy demands made on the com-prehensiveness, longitudinality, and continuity of care. When MCOs receivea global payment for providing healthcare services rather than indemnify-ing consumers against losses, the increasing enrollment of the elderly mayprovide MCOs with significant opportunities to redefine the coordination ofpatient workflow with staffing for the delivery of healthcare.

A fewMCOs appear to be taking advantage ofthis opportunity and havedeveloped innovative approaches to managing healthcare for the elderly andthe chronically ill. But these innovative approaches have been documentedonly among a few prominent HMOs. Relatively little data, measured interms of cost, outcomes, and enrollee satisfaction, have appeared on theperformance of these programs. The literature comparing outcomes and per-formance in Medicare and indemnity insurance provides no definitive finding

Primary Care: the Elderly and Chronically Il 3

supporting either MCOs or indemnity insurance. However, some findings dosignal potential problems among MCOs. In sum, we are uncertain about theconditions necessary to enable other MCOs to replicate these programs andabout how beneficial the programs in fact are. At a minimum, we suggest thatthese programs represent new conceptualizations of healthcare delivery thathave useflil potential.

Research must focus on understanding the conditions under whichorganizing MCOs based on primary care works better than organizing basedon specialty care. In the case of specialty care, there is a risk that the useof carve-outs may fragment care, decreasing information transfer (Sandyand Gibson 1996) or requiring capital-intensive information technology toprovide for information transfer. MCOs based on physicians organized asindividuals may also have less continuity and coordination of care than thosethat occur among physicians organized in a multispecialty physician group.The growth of MCOs based on physicians in individual or single-specialtypractices-now occurring in managed care markets around the country-maynot be best for the elderly. Research needs to examine the effects of carve-outs, paying particular attention to carve-outs for individuals with chronicconditions.

We have not addressed issues of favorable selection or benefit designin this review. Some evidence suggests that HMOs have attracted the morefavorable risks in the population (Hellinger 1995), but Fox and White (1995)suggest that HMOs have the same percentage of patients with chronic con-ditions as indemnity plans have. For various reasons this article has notdiscussed the issue ofselection effects. First, the selection advantage attenuatesover time. And, as anHMO does a better job in treating its young old, it willbegin to see an increase in the demands associated with the frail elderly,such as congestive heart failure (Haan et al. 1997). Although payment rates toHMOs for Medicare risk contracts may have to be adjusted to correspond tothe favorable risk selection (Riley et al. 1996), the cloud may, after all, havea silver lining. Instead of being inundated immediately with frail elderly forwhom they have not been well prepared, HMOs may have the opportunityto adapt their structures as the risk structure changes.

Managed care poses other challenges for improving the health of theelderly. Growing competition in the managed care market, rising nationalhealth expenditures, and plan switching among enrollees may have led someMCOs in managing clinical care to focus more attention on controllingcosts than on improving quality or health status. Providers are under greaterpressure to improve their clinical productivity-that is, to see more patients

347


per day, to spend a fixed (or less) amount of time with patients, and to takeless time on communication and verbal exchange with patients. Such a focuslimits the provider's ability to fully diagnose and treat an illness, to consultprofessional colleagues, to educate patients and gain patient/family compli-ance with therapeutic regimens, and to consider the patient's psychosocialneeds. These problems may be exacerbated by the growth in the size of thephysician's patient panel and the increasing severity of illness among thepatients.

Long-term contracts between providers and MCOs might mitigatesome of these problems, such as loss of continuity in provider when pa-tients switch plans. Some large HMOs now have five-year contracts withproviders. What is needed, however, are long-term contracts with individ-uals and employers. Such contracts would provide incentives for HMOs todevelop various organizational processes and mechanisms (e.g., long-termcase management, disease management programs, etc.) that might benefitelderly enrollees. Similarly, long-term enrollment for Medicare enrollees mayalso attenuate some of the HMO disenrollment and reenrollment patterns ofthe elderly (Morgan et al. 1997). The enrollment flows may not representdiscontinuity in care so much as moral hazard, especially when the patientmaintains a provider relationship and shifts solely for financial and coveragereasons.

We also have not examined the problems created by a fragmented insti-tutional environment. One of the major impediments to organizing primarycare is the fragmentation of payers and programs in the United States. Thisis particularly evident in benefit programs that link acute care and long-termcare. Some forms of long-term care may allow managed care organizationsto move patients quickly between acute and long-term care settings in abeneficial manner (Leutz, Greenlick, and Capitman 1994; Schlesinger andMechanic 1993). We agree with IOM Recommendation 5.9 (1996) that thevarious providers and payers "promote the integration of primary care andlong-term care by coordinating or pooling financing and removing regulatoryand other financial barriers to such coordination." Reducing the institu-tional fragmentation may allow the implementation of better organizationalsolutions.

Finally, we need to understand the effects of competitive pressures onorganizational structures. We know that increasing managed care competitiondecreases HMO prices (Wholey, Feldman, and Christianson 1995) and de-creases group HMO costs (Wholey et al. 1996). Our analysis of primary carestaffing shows thatHMO market penetration increases the use ofprimary care

Primary Care: the Eldery and Chronically Il

staffing except in markets with a large number of competing HMOs. Perhapshaving a large number ofcompetingHMOs leads to a greater use of access tospecialists as a way to differentiate products, a situation that may work againstcoordinating care for the frail elderly and those with chronic conditions.Competitive pressures may increase an MCO's organizational reluctanceto make needed investments in information systems, to support systems forsocial networks, or to undertake innovative programs with uncertain returns.

ACKNOWLEDGMENTS

We thankJon Christianson,James Cooper, and the anonymous reviewers fortheir comments.

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Managed Care and the Delivery of Primary Care to the Elderly and