Collaborative Healthcare Series: A Brief History of Managed Care


Healthcare policy is at the forefront of many Americans’ minds, especially during this tumultuous election season. This next series on Healthify Insights will focus on collaborative healthcare and its development, with an emphasis on the concept of managed care.

What is Managed Care?

Managed care entails collaborative work between healthcare stakeholders, and the assumption of risk by those entities involved in administering care. These conglomerates can be compromised of various insurers, providers, and community based organizations, often striving to represent and uphold the best interests of the populations that they cover.

Additionally, organizations focused on collaborative care tend to be incentivized by payment reforms such as capitation payment systems and shared savings, as a way to motivate providers to deliver quality care while decreasing cost.

Reforming Care through Collaboration

While efforts to curb high costs, expand coverage and provide efficient and quality care have been spearheaded in recent years, especially with the implementation of the Affordable Care Act (ACA), this concept is nothing new.

Dr. Michael Shadid, a Lebanese immigrant living in rural Oklahoma, formed the Cooperative Health Federation of America in 1947, the first-ever healthcare collaborative in the United States. Shadid saw that many Americans living in the rural Midwest had trouble accessing healthcare services, and that the available services were of poor quality. This resulted in the deterioration of the health of many rural, low-income communities. Shadid brought together physicians, hospitals and insurers as a way to expand access to healthcare services, inspiring the idea of managed care, and encouraging the formation of future healthcare collaboratives.

Mid-Century and Health Maintenance

During the 1960s and 70s, Henry J. Kaiser began a movement to form institutions bound by the concept of care coordination, known as Health Maintenance Organizations (HMOs). This format aligned physicians and specialists within a larger organization in order to lower costs by improving efficiency in the healthcare sector, and avoiding the replication of services.

Under an HMO plan, patients are able to choose a primary care physician (PCP), but are not allowed to seek treatment from a specialist without a referral from their PCP. Exceptions are made for emergency visits, or for women seeking an OB/GYN. The goal is to reduce costs by aligning all the individuals involved in the process of providing health services. Currently, more than 92 million Americans are enrolled in HMO plans.

The Advent of Accountable Care

While HMOs have a huge presence and history in the American healthcare system, the Affordable Care Act initiated significant reform to the overall current framework, which included the creation of Accountable Care Organizations (ACOs) under section 3022.

ACOs retain a similar structure to the collaborative that Shadid founded in the 1940s, while fostering similar goals to current HMOs. ACOs are groupings of doctors, hospitals and other providers who form collaboratives in order to encourage communication and coordination as a means to improve the health of the populations they serve.

The first ACOs focused on incorporating Medicare beneficiaries, and adopted payment reforms such as shared-savings as a way to incentivize the provision of high-quality care. This also created a movement away from traditional fee-for-service payments. While there are some exceptions, ACOs generally assume a certain level of risk, in order to hold them accountable to their patients, and are reinforced for high-quality care through incentive payments.

As of the beginning of this year, all fifty states and the District of Columbia had instituted some form of Accountable Care Organization. Ten of these states have implemented the Medicaid ACO model, while six others are actively pursuing these care collaboratives. Additionally, Leavitt Partners, a Salt Lake City-based healthcare consulting firm, estimates that close to 30 million Americans receive their healthcare services through an Accountable Care Organization.

Healthify’s Solution

Not only is this model becoming more widespread, but ACOs across the country have seen great success. Oregon’s Coordinated Care Organizations (CCO)s, which are their version of a Medicaid ACO, have seen a 23 percent reduction in ED utilization amongst their patient population. Meanwhile Minnesota and Colorado have achieved a combined savings of over 150 million dollars. 

Despite these successes, many care collaboratives continuously experience challenges that we at Healthify can help address. Our extensive network of validated, high-quality community based resources allows our clients to effectively address social determinants, reducing overall costs and emergency room visits.

Furthermore, our streamlined care coordination platform allows for easy referral tracking, and has resulted in a 70% reduction in referral time for our active users. Healthify has recognized the achievements of these organizations, nationwide, and have tailored our platform to continuously support innovation, collaboration, and coordination across the healthcare system.


Topics: Medicaid managed care Accountable Care Organizations

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