The purchaser-driven reformation in health care: alternative approaches to leveling our cathedrals.

In the summer of 1992 an apocryphal story made the rounds at many health care conferences. It seems three Japanese businessmen had motored across the United States and declared that in the course of their travels they had discovered what was wrong with America. They said that in virtually every city and community through which they drove, the newest and most magnificent buildings they observed were hospitals; and the oldest and most dilapidated buildings they saw were public schools. Though less elegant and engaging than the Somers metaphor, this story may better capture the sense of reckoning facing our profession and industry. The potential for seeing our cathedrals vastly altered, if not leveled, has never been greater. The calls for reconfiguration and regionalization of hospital and other medical care services are mounting and coming from many different quarters. In some cases the ill-defined rubric of "managed care systems or networks" is employed while in others "vertically integrated provider systems" or "regional financing and delivery boards/authorities" or "community care networks" is the terminology of choice. Irrespective of the nomenclature, widespread emergence of new financing and delivery arrangements seems imminent. But major doubts remain as to where the impetus for regionalization and reconfiguration will come. It is not at all clear whether the provider community, primarily hospitals, has the wherewithal to sponsor and to engineer rational transformations. The record of the industry to act in unison in a proactive and preemptive fashion to control events or, at least, forestall undesired developments is not impressive--for example, the "Voluntary Effort." Significant legal obstacles to the required collaboration also exist. And the contribution of integrated hospital systems to achieving effectiveness has yet to be demonstrated. Finally, from the hospital vantage point, the conversion from a hospito-centric to a continuum of care-centered ethos remains a daunting prospect, especially while the remedy seems more painful than the malady. However, much of the discussion of design prospects and possibilities ignores the reality that significant purchaser-induced restructuring and system reconfiguration is already underway. While moving in fits and starts and varying widely from market to market, intensifying purchaser aggressiveness is having profound effects on our medical care delivery systems. And the models being promoted do not necessarily correspond to conventional provider views of how delivery systems should be restructured. The impact of aggressiveness will become more pervasive as cost pressures continue to grow for purchasers and more draconian measures to purchase and manage care ensue. The fact that many in the hospital industry believe that we are only now entering a period of discussion and deliberation of moderate notions like community care networks suggests they may be badly underestimating the extent to which the "barbarians are already at the gates." This article addresses a series of issues related to the theme of recognition of and readiness for the transformations already underway. The case for redesigning our existing financing and delivery systems is initially reviewed and set in a conceptual framework. Next major impediments or obstacles to provider sponsorship of rational reform and creation of these systems are presented. In light of these assertions, the extent to which purchaser-driven system reconfiguration is underway is reviewed. Three broad ideal types or models are introduced and delineated to suggest how they embody different approaches to responding to demands for cost-effective alternatives to existing financing and delivery systems. The common features and tasks across these models are discussed. I conclude both by highlighting some of the more troubling, if not ominous, implications of managing new systems in a world of dramatically diminished resources, and by enumerating some of the key messages that contemporary managers and observers might draw from the arguments advanced here. …