Defining managed care
Managed care is an administrative philosophy under which certain management principles that are standard in other industries are applied to the healthcare industry.
A managed care organization is the bureaucratic entity that applies the techniques of managed care to a population of actual patients. Health maintenance organizations (HMOs) and preferred provider organizations (PPOs) are two types of managed care organizations. To keep things simple, in this post I will arbitrarily use the term HMO as shorthand for all species of managed care organizations.
Since it is only an administrative philosophy - a technique, a tool - managed care is value-neutral. It is neither good nor bad, any more than any other tool is good or bad. What is important is how the tool is used. Buy cheap health insurance today!
Pure managed care
Managed care is a concept that has been around for decades, developed in academic and intellectual circles by healthcare policy experts, economists, governmental commissions, and industrial management experts. In its purest form the idea behind managed care is a simple and useful one - it is to apply management principles that have been used successfully in other industries to the healthcare system, thereby injecting logic, organization, and accountability to what was a bastion of disorganization and inefficiency.
There are many industry-derived principles that could be applied to healthcare, but the unifying idea behind most of them boils down to one word: standardization.
Standardization is virtually a synonym for industry. In industry, standardization is the primary means of optimizing the two essential factors in any industrial process: quality and cost.
Let’s state this formally as the Axiom of Industry:
The standardization of any industrial process will improve the outcome and reduce the cost of that process.
If you had a widget-making factory, you would break your manufac
