Bill FeraThe efforts of the Affordable Care Act (ACA) to align financial incentives with better care at lower costs are gaining visibility in the marketplace. What was once a “holy grail” goal is now becoming a competitive market imperative. This shift is perhaps best represented by the advancement of accountable care organizations (ACOs), which—despite some setbacks—are steadily gaining a stronger foothold. 

As this evolution continues, the industry has turned its attention to what is now often referred to as Managed Care 2.0. The question is whether it is an entirely new approach at integrating and coordinating care delivery or merely a warmed over repeat of Managed Care 1.0, perhaps best symbolized by the HMOs of the 1990s?

The ACA creates an environment for healthcare organizations to avoid many of the pitfalls of Managed Care 1.0. However, to avoid falling into what that famous baseball philosopher Yogi Berra once described as “déjà vu all over again,” providers will need to rethink their traditional strategies in many key areas, including the following.

Leadership. Unlike the managed care system of the 1990s, Managed Care 2.0 looks to physician leaders to call the shots, setting the criteria on which appropriateness of care is based. Providers need to capitalize on this empowerment by establishing an effective leadership structure that includes partnering jointly with payers, charting the course for goals in patient care, and defining how costs will be paid and information will be shared. 

Cost Control. In contrast to the singular focus on reducing costs by controlling utilization—the hallmark of Managed Care 1.0—payers and providers today understand that controlling costs involves identifying and supporting the care of patients suffering from chronic disease. To accomplish these ends, providers need to enact strategies to shift how care is delivered, particularly by identifying high-risk patients early on and implementing proactive disease and case management programs. 

Care Management. Managed Care 2.0 takes a far more comprehensive approach to managing care across the continuum, directing patients to appropriate facilities to receive needed services.  When designed correctly, population health management programs bring together different, yet complementary strengths: payers’ robust customer data and providers’ rich clinical data and experience. The integration of this information can yield more actionable information and customized care interventions. 

Quality of Care. In Managed Care 2.0, measuring quality improvement is the abiding principle of an accountability payment structure that links cost and quality. To fully reap the rewards of improving patient outcomes, providers will need to aggressively identify gaps in care through real-time surveillance, develop supporting metrics and benchmarks, and assess current patient discharge processes to determine whether changes are needed in how care is coordinated.  

Managed Care 2.0 provides the road map for providers to compete in the value-based system of health care that is quickly becoming a reality. Avoiding the mistakes made in Managed Care 1.0 will require an appreciation by providers that no one entity has the resources achieve success alone and a willingness to engage in innovation collaborations with payers and other stakeholders to fill those gaps.


William A. Fera, MD, is chief medical officer and the clinical transformation leader in Ernst & Young LLP’s Health Care Advisory Services practice.


The views expressed herein are those of the author and do not necessarily reflect the views of Ernst & Young LLP.

Publication Date: Thursday, August 15, 2013