Managed Care Annual Reviews

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February 26, 1998 17:20 Annual Reviews AR054-24
Annu. Rev. Public Health. 1998. 19:52737

Copyright c 1998 by Annual Reviews. All rights reserved
MANAGED CARE AND PUBLIC

HEALTH DEPARTMENTS: Who is
Annu. Rev. Public Health 1998.19:527-537. Downloaded from www.annualreviews.org
Access provided by Universidad de Antofagasta on 05/26/17. For personal use only.
Responsible for the Health of the

Population?
Bruce W. Goldberg
Department of Public Health and Preventive Medicine and Department of Family
Medicine, Oregon Health Sciences University School of Medicine, Portland, Oregon
97201; e-mail: goldberg@ohsu.edu
KEY WORDS: public health departments, managed care, population-based medicine, health care
delivery systems
ABSTRACT
This review examines changes over the past decade in the delivery of health care
in the United States, specifically the move toward managed care and capitation.
Over 77 million Americans are now enrolled in health maintenance organizations,
and the health care delivery system is reorganizing into large group practices and
integrated health systems. Examined here are the implications of this shift on
the interaction between managed care and public health agencies. How will a
population-based system of health care be achieved in light of managed care
organizations responsibility only for their enrolled population, in contrast to the
responsibility of the public health service for the entire population? Where does
the responsibility of MCOs end and that of public health begin? Should certain
public health functions be absorbed by managed care organizations? What are
the prospects for partnership between these two systems?
INTRODUCTION
The past decade has seen considerable changes in the organization and delivery
of health care within the United States. A system once dominated by indem-
nity insurance and fee for service practice is now moving toward managed
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528 GOLDBERG
care and capitation. Between 1990 and 1996 the number of Medicaid bene-
ficiaries enrolled in managed care has gone from 2.3 to 13.3 million and the
number of persons receiving health services through managed care organiza-
tions (MCOs) has doubled (20). Today 77 million Americans are enrolled in
health maintenance organizations (HMOs), and the health care delivery system
is reorganizing itself into large group practices and integrated health systems
that include providers of care, hospitals, and ancillary services (34).
Current trends indicate that managed care will remain the dominant paradigm
for health care delivery during the next decade. The role of the local public
health department in our emerging health care system and its interaction with
managed care has yet to be defined. This article explores the current relation-
ship between MCOs and local public health agencies and examines its future
implications. The term managed care organizations (MCOs) is used to describe
health plans under the management of a single entity that provide health insur-
ance and medical services for its members through a defined network of par-
ticipating providers. MCOs manage the health care practices of their providers
and attempt to control the cost and quality of care by coordinating medical and
other health-related services. The term local public health agencies is used to
describe local governmental agencies, usually county or city, that are invested
with power by their state governments to protect the publics health and deliver
public health services to citizens.
THE TRADITION OF THE LOCAL

HEALTH DEPARTMENT
Although the mission of the public health system has changed little in the past
two centuries, its roles and responsibilities have shifted dramatically. During
much of the eighteenth and nineteenth centuries, public health activities fo-
cused on contagious disease containment and sanitation. Scientific advances
surrounding the identification of bacterial and viral causes of disease and the
development of immunizations and other techniques to prevent or control the
spread of illness moved public health toward the provision of individual care.
Public health agencies soon began working not only to prevent disease but also
to treat it. In the early twentieth century, public health agencies were actively
involved in treating tuberculosis and other important infectious diseases of the
times.
Public healths involvement in individual care was further enhanced during
the middle and late twentieth century. During this period, the federal gov-
ernment accepted greater responsibility for providing health care, and the role
of governmental public health agencies in providing individual health services
expanded. This move toward individual care helped expand the resources and
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PUBLIC HEALTH DEPARTMENTS 529
notoriety of public agencies during an era when medical care became increas-
ingly dominated by technology and delivered by hospital-based specialists. It
also helped to further establish local public health departments as the providers
of last resort for individuals without other resources.
Beginning in the late 1960s, a variety of federal policies were established
that increased access to certain categorical services such as immunizations, well
child care, family planning, prenatal care, and treatment of sexually transmitted
diseases. Local health departments became the primary recipients of federal
and state dollars designated for such services. As these categorical programs
expanded, access to comprehensive health care for many citizens declined.

During the first half of the 1980s, the number of individuals without access to
regular health care increased by 65% (28). Increasing numbers of individu-
als without access to primary care services and federal dollars directed toward
categorical programs helped transform local health departments into an impor-
tant component of the medical safety net. Although local health departments
continued to maintain their traditional public health functions, they became an
integral part of the clinical services delivery system for the poor and uninsured.
TOWARD POPULATION-BASED HEALTH CARE

As local public health agencies became more involved in individual care, some
within the medical profession saw a growing need for medicine to adopt a
more population-based approach. Community-oriented primary care was pro-
posed decades ago as a practical way to integrate the principles of community
medicine and public health into the delivery of primary health care (16). Yet,
despite compelling appeals for its widespread use, its successful application in
the United States has been limited (19, 25). Now, as our health care system
moves away from fee-for-service reimbursement and toward capitation, there
is renewed interest in population-based health care (7, 41). Under capitation,
physicians and health care systems are paid not for the individual services
they render, but rather for providing care to an identified population. There is
growing recognition that in order to function effectively within such a system,
physicians and health care systems need to move beyond the traditional one-
to-one physician-patient model toward population-based clinical practice (7).
Today, the emerging health care system is becoming dominated by vast pri-
vate systems that are responsible for providing care to large numbers of indi-
viduals. Some of the fragmentation that existed between physicians, hospitals,
and ancillary services is diminishing as various segments of the health care de-
livery system are integrated within these large systems. Many MCOs see their
responsibility as not only providing health care but also improving the health
status of their population. Some proponents of managed care have even argued
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530 GOLDBERG
that since MCOs suffer the consequences of unresolved public health problems
such as AIDS, violence, and drug-resistant infections, they must share the re-
sponsibility for safeguarding the publics health (2). However, there are some
key differences between managed care organizations and the public health sys-
tem. Paramount among them is that the public health system is responsible for
assuring the health of the entire population without regard to health insurance
coverage. Managed care organizations, on the other hand, are responsible only
for the health of their enrolled population.
The movement toward a health care system with a population focus and the
emergence of MCOs that are interested in improving the health status of their
population are indeed encouraging. However, this trend also poses some com-
plex questions. Where does the responsibility of MCOs end and that of public
health begin? Should certain public health functions be absorbed by man-
aged care organizations? How can and should these two types of organizations
coexist?
THE REORGANIZATION OF THE

PUBLIC HEALTH DEPARTMENT
The Institute of Medicines (IOM) 1988 report, The Future of Public Health,
declared that revitalizing and maintaining the public health system could not
be borne by public health professionals alone (14). Rather it placed responsi-
bility for addressing the mission of public health on private organizations and
individuals as well as on public health agencies. Now, in a time of increased pub-
lic/private partnerships, these words are particularly applicable. Public health
departments will need to reorganize to maximize their effectiveness in a chang-
ing health care environment and to carefully consider which attributes of the
new health care system can help them be more effective and which will ham-
per them. The rapid changes within our health care system that have taken
place during the past five years are only now beginning to impact local public
health departments. Today, most local health departments remain organized to
function in the health care system of the past decade (8). However, as the orga-
nization and financing of health care continues to evolve, it is only natural that
a new type of public health department will emerge. Among the many issues
that will accelerate changes in the structure and function of health departments
are consolidation of the marketplace, regionalization, and the need for data.
Consolidation in the Marketplace

The consolidation of health care providers into a handful of large health systems
may present new opportunities for local health departments to improve their
effectiveness. In many areas, public health officials must still make individual
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connections with numerous physicians, medical practices, medical societies,

and hospitals. However, in places where there has been substantial consoli-
dation, health departments, by working with the few local MCOs, can now in
essence work with several-hundred physicians. For example, to improve lead
screening in areas where the marketplace has consolidated, by successfully
working with four or five health systems, public health departments can to see
to it that the majority of the population is screened (4a). Certainly, local health
departments will still have to provide services or, in this case, screen those
individuals not within those large systems of care, as well as the uninsured. But
the efficiencies to be gained can be enormous.

Such consolidations, however, may also hamper the effectiveness of local
health departments. Large health systems could wield considerable power and
influence health policy for their own benefit or in ways that may be in opposition
to what public health officials deem as best for the population at large. In
addition, there is a growing perception that with large MCOs attending to
population health, there may be little need for the local health department. In
this time of decreased governmental expenditures on public services, such fears
have become increasingly real (15). However, regardless of these opinions, it
will still be necessary for local public health agencies to provide a number of
services. As in the example of lead, in addition to screening those outside large
MCOs and the uninsured, local health departments will still need to work to
prevent lead poisoning and to see to it that environmental sources of lead are
eliminated. Such activities are unlikely to be performed by large health systems.
Regionalization
As MCOs regionalize, it may make sense for local health departments to do
the same. In many areas the public health infrastructure is comprised of small,
local, or county health departments with part-time health officers. Such an
arrangement was logical in the health care system of the past decades. Medical
care used to be organized locally, and it was efficient for local health departments
to work with local physicians, hospitals, and medical societies. Today health
care is becoming increasingly regionalized. As MCOs regionalize and care for
large numbers of individuals across wide geographic areas, it may make sense
for local health departments to do the same. In a five-county area served by a
handful of MCOs, it will be more efficient to have one large health department
interacting with the MCOs and assuring public health than to have five different
local health departments, each doing the same.
Managed care organizations are beginning to show progress in improving
the health of their populations (22). However, in todays competitive mar-
ketplace there are few examples of MCOs working cooperatively to improve
health across an entire community. Regional public health agencies can act as a
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532 GOLDBERG
powerful force to bring together MCOs and coordinate efforts to assure com-
munity health (38).
Data
Data and information technology are essential for both MCOs and public health
agencies to improve population health status. Public health agencies have much
experience in the development and utilization of disease registries, vital statistics
data, and large population-based surveillance systems such as the Behavioral
Risk Factor Surveillance System (6). Likewise, MCOs are making large in-
vestments in data systems. However, for data to be valuable across the entire
population, they must be standardized. In addition, there must be a willingness
on the part of managed care organizations to relinquish some of their propri-
etary hold on data and share them in efforts to improve the health of the entire
population. Public health agencies can take the lead in bringing all involved
together to determine what kinds of data should be collected and to develop
standardized data systems that link both the public and private sectors (33).
CURRENT RELATIONSHIPS BETWEEN MCOs

AND PUBLIC HEALTH AGENCIES
Published information detailing the relationships between MCOs and public
health agencies is limited. The rapid growth of managed care and the large num-
ber of mergers and acquisitions in the health care marketplace have made it diffi-
cult to adequately assess these relationships. Yet it appears that in many commu-
nities, public health agencies and MCOs operate independently of one another.
A survey of local health departments in over 60 diverse locales in the United
States found that less than half of the local health departments located in areas
with managed care maintained any relationship with a managed care plan (9).
Those areas with a long history of strong managed care presence appear more
likely to have public health agencies and MCOs working together (2, 4, 37).
The relationships that do exist between MCOs and public health agencies
can generally be categorized as either cooperative, contractual, or partnerships.
Cooperative relationships are those in which organizations voluntarily consent
to work together. These are informal relationships that employ no binding legal
agreements. They may be rudimentary, such as joint sponsorship of a confer-
ence, health fair, or other community event. Or they may be more substantive,
such as working together to identify major health problems within a community
or to discuss the responsibility of various community organizations for solving
health problems.
In contractual relationships, MCOs contract with public health agencies to
provide services for their members. Usually these contracts are for specific
services for which public health agencies have particular expertise such as
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immunizations, family planning, or communicable disease management (5, 30).

For example, in some communities, managed care organizations contract with
public health agencies to manage tuberculosis screening, diagnosis, and treat-
ment services (10). Such contractual relationships may be encouraged or even
mandated by state Medicaid programs. In other communities, public health
agencies are contracting with managed care organizations to provide primary
care services (4, 17).
Public health agencies have a long tradition of providing primary care ser-
vices for Medicaid, the uninsured, and other vulnerable populations lacking
access to care. For many years, the role of public health agencies, community
health centers, and other safety net providers in caring for these populations and
in providing other needed services such as transportation, language translation,
and social services was to some degree federally supported through cost-based
reimbursement. Rather than being paid at the standard Medicaid rate, under
cost-based reimbursement, qualified safety net providers received an enhanced
compensation that better reflected the costs of the variety of services they pro-
vided. Now, with the shift of Medicaid into managed care, such supplemental
payments are disappearing (29). In some areas where public health agencies
can contract directly with the state, some supplemental financial support is pro-
vided, but not to the same degree as in the past. However, in areas where public
health agencies must contract directly with managed care plans, they do so at
standard community rates. At such rates, public health agencies generally earn
far less than they did under cost-based reimbursement (12).
Contracting with MCOs to provide primary care services has forced difficult
choices for many public health agencies (31). Without such contracts, they lose
their patients and with them some of the resources needed to help care for the
uninsured. On the other hand, such contracts may not be financially viable for
public agencies. As true safety net providers, public health agencies have tra-
ditionally provided primary care services to a population that is at high medical
risk, including IV drug abusers, the homeless, and the chronically mentally ill.
In addition, many public health agencies care for a disproportionate share of
those who require language translation, transportation, and other services that
add significantly to the costs of providing care. With large numbers of medically
high-risk and costly patients, it is hard for public health agencies to be finan-
cially successful under capitated contracts (13). As such, many public health
agencies are in the difficult position of having to choose between relinquish-
ing their primary care delivery roles or making the resource and infrastructure
investments necessary to serve Medicaid recipients more cost-effectively and
to attract new patients to their systems (18, 21).
Finally, there exists the opportunity for public health agencies and MCOs
to engage in true partnerships. In such relationships, MCOs and public health
agencies establish jointly operated and governed programs and share the
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534 GOLDBERG
financial risk and accountability (9). Another model is for public agencies
to partner with other health care providers to establish their own managed care
organization (18). This is currently being done in Oregon, where public health
agencies, community health centers, and an academic health center have suc-
cessfully formed a Medicaid managed care organization (3). The organization
maintains a private not-for-profit structure, and is governed by a board of di-
rectors comprised of representatives from each of its partners.
CORE PUBLIC HEALTH SERVICES

As an increasing number of states transfer their Medicaid populations to man-
aged care systems, many local health departments are losing a portion of their
traditional clientele. Managed care systems are providing many of the services
traditionally delivered by local public health departments such as immuniza-
tions, tuberculosis treatment, maternal and child health care, and even some
of the testing usually performed by public health laboratories. This has im-
plications on the funding of public health and the quality of services being
delivered in both the public and private sectors (39).
The ability of managed care organizations established to care for commer-
cially insured populations to adequately meet the needs of economically dis-
advantaged populations has been questioned (12, 27). In Los Angeles, young
children who used private physician offices and HMOs were less likely to be
fully immunized than were children cared for at public health clinics (40). In
New York and Philadelphia, there are concerns that the TB control practices
of managed care organizations are not of the same high quality as those of
the health department (36). Additionally, as more patients move out of public
health clinics and the resources going to the public health system decline, public
health departments may be forced to cut back on the number of services they
offer, and the quality of existing services may be threatened. While this will be
felt most by the uninsured, who will continue to rely on public health depart-
ments for services, it will nevertheless have effects throughout our society. For
example, as many laboratory services move out of public health laboratories
and into the private sector, the ability of public health laboratories to provide
targeted testing, deal with emerging pathogens, and provide surveillance ser-
vices will be diminished. Such services are unlikely to be supported by the
private sector (32).
RESEARCH NEEDS
The structure of local health departments and the manner in which they interact
with the local health care systems are beginning to change, yet we know little
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about what is working and what is not. Several fundamental questions require
examination. What public health functions are MCOs providing and how ef-
fective have they been? How has the funding of and the services provided by
local health departments changed? What effect have changes within health de-
partments had on their ability to provide services for the uninsured? What are
the relationships between MCOs and public health departments, and how do
these impact on the health of the population? How have changes in the health
care system affected the ability of local health departments to carry out the core
functions of public health (assessment, assurance, and policy development)?

THE FUTURE
As greater emphasis is placed on population-based health, managed care plans
are becoming increasingly attentive to public health and preventive measures.
The Health Plan Employer Data Information Set (HEDIS), now widely used
to measure health plan performance, has helped move MCOs in this important
direction. A significant determinant in the choice of HEDIS indicators is the
ability to link them to public health objectives, particularly the Healthy People
2000 goals (26). HEDIS therefore contains indicators that measure immu-
nization rates, cancer prevention activities, and maternal and child health care.
Since health plans are directing considerable resources toward achieving an ad-
mirable showing on HEDIS indicators, there may be a reduced need for public
agencies to deliver preventive services, thus allowing them to better concentrate
on assurance and assessment activities (11). For example, rather than deliver
immunizations, public health agencies will be able to coordinate immunization
registries and assess the immunization status of the population (24).
Public health agencies will, however, continue to need to work for equity
and access to health care for all. To do so will require public health agencies to
work with legislators, community leaders, and the health care delivery sector to
assure that all maintain a commitment toward achieving this goal. The growth
of Medicaid managed care has presented some difficult choices for local pub-
lic health agencies. Some have chosen to compete with the private sector for
Medicaid patients, often at the risk of losing their focus on public activities and
needing to direct increased resources toward creating more efficient primary
care systems (1). Others have chosen either to withdraw from the Medicaid
business entirely or have been unable to compete with the private sector, thus
losing important revenues that have helped subsidize care for the uninsured and
other public functions (15). Public health agencies must continue to advocate
for the underserved. However, whether this entails providing primary care ser-
vices will depend on society placing a high value on equity and access to health
care for all and the development of national policies that support such goals.
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536 GOLDBERG
Regardless of their decision surrounding the delivery of primary care to the

underserved, the primary functions for local public health agencies will con-
tinue to be that of assurance, policy development, and assessment. Local public
health agencies should be responsible for assuring that quality health services
are available and accessible to everyone in their community. Currently, most
public health agencies lack the regulatory authority to assure that managed care
organizations are accountable to the public. In most locales, regulatory over-
sight of managed care organizations is provided by insurance commissions that
concentrate on financial and organizational issues rather than on health. Assur-

ing that MCOs are indeed accountable for population-based health outcomes
will require that public health agencies play a major role in the development
and monitoring of performance measurements. Public health agencies will need
to work collaboratively with insurance commissions, and they will need bet-
ter tools to assess health status as well as increased access to data currently
collected by MCOs (35).
Managed care has amplified the population-based perspective within our
health delivery system. By so doing, local public health agencies may be able
to relinquish some service delivery activities and concentrate their efforts on
assurance, assessment, and policy development. Just how many functions pre-
viously performed by local public health agencies can or should be assumed
by MCOs remains unclear. However, regardless of the fate of managed care, it
will continue to be the responsibility of the public health system to assure the
health of the entire population.
Visit the Annual Reviews home page at

http://www.AnnualReviews.org.
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February 26, 1998 17:20 Annual Reviews AR054-24

Annu. Rev. Public Health. 1998. 19:52737

MANAGED CARE AND PUBLIC

Responsible for the Health of the

THE TRADITION OF THE LOCAL

PUBLIC HEALTH DEPARTMENTS 529

expanded, access to comprehensive health care for many citizens declined.

TOWARD POPULATION-BASED HEALTH CARE

THE REORGANIZATION OF THE

Consolidation in the Marketplace

PUBLIC HEALTH DEPARTMENTS 531

connections with numerous physicians, medical practices, medical societies,

the efficiencies to be gained can be enormous.

CURRENT RELATIONSHIPS BETWEEN MCOs

PUBLIC HEALTH DEPARTMENTS 533

immunizations, family planning, or communicable disease management (5, 30).

CORE PUBLIC HEALTH SERVICES

PUBLIC HEALTH DEPARTMENTS 535

functions of public health (assessment, assurance, and policy development)?

Regardless of their decision surrounding the delivery of primary care to the

concentrate on financial and organizational issues rather than on health. Assur-

Visit the Annual Reviews home page at

PUBLIC HEALTH DEPARTMENTS 537

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