Coverage decisions for medical technology by managed care: Relationship to organizational and physician payment characteristics

Claudia A. Steiner, Neil R. Powe, Gerard F. Anderson

Research output: Contribution to journalArticle


This study was designed to investigate the influence of the organizational structure and method of physician payment of health maintenance organizations on aspects of managed care plans' decisions to cover new medical technologies. In a national cross-sectional survey of health maintenance organizations in the United States, we asked questions about awareness of the use of new laser technologies; coverage of 15 laser technologies; and the relative importance of considerations used to make coverage decisions, including cost-effectiveness. In multivariate analysis in which we adjusted for plan size, ownership, and time in operation, we examined the influence of model type (staff, group, network, independent practice association) and physician payment method (salary, fee-for-service, capitation) on awareness of laser use, coverage, and considerations. Of 395 health maintenance organizations, 159 (40%) responded, representing 66% of enrollees in US health maintenance organizations and similar to the US market in terms of geography and model type. Seventy percent indicated that they would not be aware of physicians' use of lasers. Independent practice association model types were 40% less likely than staff models to be aware of laser use. Plan coverage for 15 different laser technologies varied substantially, ranging from 25% to 90% covered. Staff models covered three or four fewer laser technologies than did independent practice association models. Four of the top five considerations in coverage decisions were clinical; the other was cost-effectiveness. Relative to staff models, independent practice association models were less likely to list either cost-effectiveness or performance in an outpatient setting as a consideration favoring coverage. Organizations in which specialty physicians are paid under fee-for-service arrangements were more likely than those in which capitation is used to consider potential for increased cost as a consideration against coverage. Overall, health maintenance organizations were sensitive to cost; they were less willing to cover more effective technology at greater cost than more effective technology at equal cost (89% and 98% of respondents, respectively). Managed care plans vary strikingly in the range of technology offered. Staff model organizations may have an improved ability to detect the use of medical technologies and more rigid controls on coverage, and can thereby more strongly limit access to newer medical technologies. Independent practice associations, which dominate the market, may use the range of technology offered as a competitive tool. Health maintenance organizations acknowledge cost as a factor in coverage decisions for medical technology, but cost considerations appear less important as financial risk-sharing with physicians increases. More research on the impact of variations in factors used and technology coverage on quality of care is needed.

Original languageEnglish (US)
Pages (from-to)1321-1331
Number of pages11
JournalAmerican Journal of Managed Care
Issue number10
StatePublished - Nov 1 1996

ASJC Scopus subject areas

  • Health Policy

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