The New World of Managed Care: Creating Organized Delivery Systems

Prologue: In anticipation of reforms at either the state or the national level and in response to rising costs, health care organizations are changing rapidly. “Managed care” has taken on new meanings as the lines traditionally separating hospitals, physicians, and insurers begin to blur. Policymakers struggle to define this new concept of managed care, sometimes referred to as “integrated service networks” or “organized delivery systems.” These entities combine the organization, financing, and delivery of health care in ways that respond to the demographics and economics that prevail in different regions of the country. Ultimately, the system should provide appropriate care in a seamless continuum that uses limited resources most effectively. The way these new organizational hybrids grow and develop in their early years has important implications for the health and health care of Americans for years to come. In this paper Stephen Shortell and colleagues outline their research on organized delivery systems, describe the barriers such systems face, and raise key policy questions that must be answered. Shortell is the A.C. Buehler Distinguished Professor of Health Services Management and professor of organization behavior at Northwestern University's J.L. Kellogg Graduate School of Management. He has been described by one of his peers as “the premier health services researcher” in the area of health services management and organization. He holds a doctorate in behavioral science from the University of Chicago Graduate School of Business. Robin Gillies is a research assistant professor at the Center for Health Services and Policy Research at Northwestern; she holds a doctorate in political science from Northwestern. David Anderson is partner in charge of National Health Systems Integration Practice for KPMG Peat Marwick. Abstract: In response to managed care pressures and imminent legislative reforms, provider organizations across the United States are coming together to form organized or integrated delivery systems. This paper describes various approaches to developing such systems and, drawing on ongoing research, examines what is known about the performance of such systems, the barriers they face, and the key factors likely to be associated with their success. The paper also addresses important policy questions related to the extent to which organized delivery systems should be actively encouraged by health reform legislation and how such systems should be held accountable.