Managed care

a contractual arrangement whereby a third-party payer (e.g., insurance company, government agency, or corporation) mediates between physicians and patients, negotiating fees for service and overseeing the types of treatment given

Description
Managed care has in US American medical care largely replaced traditional medical indemnity insurance plans, under which payment is automatic and oversight procedures are minimal. Under managed care, the third-party payer controls specialty referrals, chiefly by appointing primary care physicians as "gatekeepers"; restricts the scope of covered services (particularly diagnostic procedures, choice of drugs prescribed, and length of hospital stay) for each diagnosis; and requires precertification review before hospital admission and a second opinion before elective surgery. Standards of care are regulated by practice guidelines, which may be set forth in oversimplified algorithms featuring binary (yes/no) choices. Prescribing alternatives are typically restricted to drugs listed in the plan's formulary. Practice guidelines, formulary choices, and other policies affecting patient care incorporate contemporary medical knowledge and professional standards but also strongly reflect strategies for loss control and for the even distribution of actuarial risk over all beneficiaries. The plan may bargain with physicians, hospitals, diagnostic laboratories, and pharmacies for wholesale prices, or may compensate providers by capitation rather than by fees for services. Managed care organizations typically employ cost-containment measures such as emphasis on preventive medicine, audits of medical records, intensive review of claims, and punitive action against noncompliant providers. See health maintenance organization