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Managed care can be defined as an organized system of health care that involves a variety of techniques and methods aimed at reducing the costs of health care. In a bid to provide effective health care services, managed care utilizes economic incentives for physicians and low-cost care methods for patients. Generally, managed care services include an integration of cost-sharing, contract with health care providers, and various systems for the management of high-cost health care services (Cooper & Rebitzer, 2004). Managed care organizations include various health care insurance programs that are designed to enhance cost efficiency in medical facilities. Also, they include programs for reviewing medical-specific services, management of inpatient medical admissions, and length of stay in medical facilities to reduce the cost of health care services (Ettinger & Lasser, 2008).
Managed Care and Managed Care Organization (MCO)
Historically, managed care and managed care organizations (MCOs) were formed as the organs responsible for reducing health care costs. Today, this is not the case as managed care and managed care organizations are currently involved in the various acts related to increased market power and price-fixing. Also, traditional health insurers used to cater to healthcare-related costs in the US. However, this was found to be expensive, thus leading to the initiative of managed care to provide health care services through financing processes, purchasing terms, delivery, and influencing decisions made by physicians in various health care services. As a result, this method led to the structuring and restructuring of the traditional method of health care service delivery, especially to eliminate bureaucratic rules that required physicians to consult for administrative acceptance in the process of carrying some important procedures and programs.
Managed care organizations usually consider the effects of costs as well as the critical decisions of physicians in joining the organizations (Cooper & Rebitzer, 2004). Furthermore, physicians usually have a variety of values and practices that make it difficult for the MCOs to attract them while at the same time controlling the costs of health care. It is worth noting that physicians have the responsibility of providing health care services to patients, thus they need to have decent earnings for their livelihood to be effective in their roles. This gives MCOs some challenges on how to reduce costs of health care while at the same time attracting the most competent physicians. Moreover, MCOs have to restrict contracts and write cost containment rules in contracts that involve a large number of physicians. Again, MCOs have to ensure that there is a balance between cost containment, quality of health care service delivery, and satisfaction of the interests of physicians (Ettinger & Lasser, 2008).
Health Maintenance Organization (HMO)
To achieve effective and efficient health care service delivery, a variety of managed care models such as Health Maintenance Organizations (HMOs) are always involved. These HMOs provide health care services and insurance services related to health by charging an employer a fixed premium for every employee who is an HMO subscriber. One such model is the Staff Model, which provides services to full-time and permanent employees. Further, there are Preferred Provider Organizations (PPOs) that provide health care services to selected beneficiaries in employer health care benefit plans. Also, there are Exclusive Provider Organizations (EPOs) that only provide health care services to participating subscribers. Nevertheless, unlike HMOs, which are regulated with HMO’s laws and regulations, the EPOs are under the regulation of insurance regulations and laws (Ettinger & Lasser 2008).
Role of the Federal Trade Commission (FTC)
The Federal Trade Commissions (FTC) and the department of justice mainly deal with health care services that are related to price-fixing and other challenges of antitrust based on market power. Therefore, it is the responsibility and role of the FTC to ensure that MCOs do not violate various antitrust laws, including the antitrust components of market power such as geographic and product components. Again, according to FTC, price-fixing is one of the per se violations of the antitrust laws, which do not require investigation and examination, as their purposes are usually clear. Generally, price-fixing leads to reduced competition as well as reduced productivity. This per se violation also includes horizontal price-fixing where two or more people come together and decide on the price to be charged on certain goods. Besides, the horizontal market division is another per se violation, which is considered to be illegal (Mains, Coustasse and Lykens, 2004).
Since FTC views price-fixing as illegal, contract with the PHO must not be used to fix prices, instead, PHO terms and conditions of contracting health care services should be used. Also, actions that could be taken to restructure this arrangement to avoid a determination that could be illegal per se should involve careful examination and investigation of market conditions. Again, the price can be negotiated to ensure that it does not increase the economic inefficiency of the market since it should not render the market more competitive (Cooper & Rebitzer, 2004).
Finally, the FTC provides an alternative for price-fixing, which involves an agreement between competitors to ensure that a more stable price is reached for the services and products offered. Although this agreement should not affect consumers, enough evidence is necessary to reduce the chances of competition. Again, the rule of reason should also be applied as the best alternative. Indeed, for price-fixing to occur, there must be an agreement between competitors, hence external market forces do not affect it (Creighton, 2004).
Cooper, D., & Rebitzer, J. (2004). Managed care and physician incentives: The effects of competition on cost and quality of care. Web.
Creighton, S. (2004). Diagnosing physician-hospital organizations: Federal trade commission remarks before American health lawyers association, program on legal issues affecting academic medical centers and other teaching institutions. Web.
Ettinger, D., & Lasser, M. (2008). Government agencies soften stance on what constitutes price fixing. Web.
Mains, D.A., Coustasse, A. & Lykens, K. (2004). Physicians Incentives: Managed Care and Ethics. The Internet Journal of Law, Healthcare and Ethics, 2(1). Web.