The cost of quality health care in Asia continues to increase.

The factors behind the rise in health care costs are only going to intensify over time: these include a shift of cost from public to private sector, emerging markets with higher demand for health care services, medical advances, inflation, and the cost of equipment and infrastructure.

But there is a way to regain control of cost and quality through managed care.

Managed care strategies are increasingly used by health care organizations as a way to keep health care expenses under control. One component of managed care is negotiating more favourable financial terms and packages of services with a network of health care providers, while ensuring quality of care is not compromised. The model of managed care aims to limit the spending per capita while making available benefits that improve the standard of health care to the member. And because this is a market paradigm that won’t be reversed any time soon, providing suitable and affordable health insurance benefits that work for both employees and employers is a significant financial consideration.

So let’s look at managed health care and its benefits in more detail. 

The fundamentals of managed care

Managed care comes in a few different forms, but there are some key aspects which are relevant across the board. In most managed care plans, you can expect to find the following:

  • Provision of quality care for all members: By building networks of preferred providers, managed care will ensure a consistent delivery of quality health care for members.
  • Reduced and controlled costs for individuals and employers: The network of providers, utilization management, and more efficient administration can reduce the costs that spiral upwards with traditional medical plans.

  • Health care provided is adequate and appropriate for the patient’s condition: Managed care uses clinical pathways that help determine the medical necessity and appropriateness of a treatment. Clinical pathways are applied through a utilization management program that includes authorizations and concurrent review.
  • Health care services delivered by reputable and qualified health care providers: Provider networks should only include qualified and proven health care providers.
  • Removal of any inefficient operating processes or practices: Efficiencies are built in to the care plan, and recognized pathways are used to circumvent unnecessary time and cost.

The big three: Managed care plan variations 

Managed healthcare plans typically fall into one of three categories – Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Point of Service (POS) plans.

With an HMO, a contract is created with a network of health care providers who will be responsible for the treatment of members enrolled into the HMO. Members of the plan can only access the health care providers within the network – if they were to look elsewhere for medical procedures and treatment, the HMO would not meet any of the costs. With an HMO plan, the first stage of care is to be appointed a primary care physician, who can also be referred to as a gatekeeper. This physician is responsible for the initial arrangement and authorization of any health care and they play a major role in the pre-approval and direction of the patient journey, recommending and authorizing any treatment that the patient requires. They can filter out unnecessary applications for treatments, and cut down on system abuse and fraudulent claims. While the plan does restrict the member to a certain extent, it also offers them cost savings.

A PPO is similar to an HMO, and operates under the same philosophy of creating a network of health service providers to offer care for its membership. Unlike an HMO, this is not as restrictive because it allows members to use alternative health care providers from outside the network – but the member is likely to find themselves contributing to the cost of the treatment in this case. Also, unlike the HMO, there is no gatekeeper to manage the health care of the membership.

Lastly, there are POS plans. This approach is a hybrid of the HMO and PPO options. With a POS plan, the member is allowed the flexibility to choose which type of plan he or she wants – this option is available every time there is a need for a treatment. There is also the choice to have a gatekeeper (or not) as well as the ability to go outside the network or remain within, of course with greater expense if the member goes outside. Due to the increased flexibility and freedom of choice offered by a POS plan, they are increasing in popularity.

While these plans all differ, what they share are significant advantages for patients, employers and the insurance industry.

So let’s look in a little more depth at the benefits. 

Benefits of a strong managed care model 

A 2014 paper from a researcher at Columbia University looked at managed care in the state of Florida and found that savings of seven percent in total hospital costs were possible in the first year, with 12 percent achievable in year two. The savings opportunities in Asia for managed care are more significant given the level of health care market maturity. There are a few indicative case studies and market pilots that have resulted in managed care savings of 20-25 percent.

A 2014 paper from a researcher at Columbia
University looked at managed care in the
state of Florida and found that savings
of seven percent in total hospital costs were
possible in the first year, with 12 percent
achievable in year two.

In addition, an effective managed care plan will also help control the pharmaceutical costs involved in treatments. It’s a well-known fact that significant savings are to be made by using non-branded drugs as opposed to branded ones. Research in the US by the FDA has shown that on average the cost of a generic drug can be as much as 80-85 percent lower than its branded equivalent. The figures then speak for themselves – using a managed care approach to regulate the pharmaceuticals used by the physicians can mean big savings.

When examined, the implementation of a well-run managed care plan shows that the cost of health care insurance can be controlled in an effective manner without sacrificing quality benefits for the workforce. By working with patients and providers, pre-treatment assessments can reduce unnecessary procedures being performed and therefore reduce costs. But that’s not all when it comes to gaining a better grip on the costs involved. Having the right managed care plan means that there are also savings to be made in the administration of care. By using cutting edge technology for greater efficiency in care and claims management, lengthy and cumbersome paper processes can be eradicated.

Having the right managed care plan means
that there are also savings to be made in the
administration of care.

With the provider network approach that a managed care plan brings, the costs can also be reduced by negotiating discounted fees from providers who would be keen to be involved. As those relationships are created and developed, stronger bonds between providers of health care and providers of care plans will enable better and more dynamic products to be honed.

Utilization management also comes in to play, where companies that use care plans can better govern the inpatient care process. By using recognized clinical pathways, the utilization process can include prior authorizations and concurrent reviews to understand and examine all inpatient care before and after admission for treatment. Retrospective reviews are also part of the utilization management approach that works to ascertain that the care is both medically necessary and appropriate.

And let’s not forget the power of data. Managed care plans also often include market-leading claims analysis functions. By having strong and accurate claims analysis data on hand, employers can find patterns in claims and formulate ways of reducing them. And reducing claims means reducing costs, so many employers will want to review the information made available to them and aim to introduce more cost-efficient preventative measures rather than meet another year of increasingly expensive claims. 

By having strong and accurate claims
analysis data on hand, employers can find
patterns in claims and formulate ways of
reducing them.

The move to managed care

As shown, swapping your ‘regular’ health care insurance product for one that offers a managed health care approach can supply both cost savings and greater control of ongoing expenses without decreasing quality of care.

The efficiency that a managed care approach brings is a huge advantage to employers when it comes to lowering costs – from the gatekeeper function to technology that allows a streamlined administrative process, and from cost reduction in both drugs and treatments to the benefits of claims analysis.

Managed care plans have paved the way for greater cost control while at the same time have provided a joined up approach to quality health care that benefits patients, providers and employers. As health care costs in Asia continue to rise, the managed care option is a way for all parties to finally gain some control over the situation.


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Inova care is an industry leading consulting and health care administration company specializing in managed care, clinical pathways and cost containment solutions for corporations and insurance companies.


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