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Curriculum Center Browse Bibliography Build EPacket Pricing Structure Distribution Process Management Control in Nonprofit Organizations
Westinghouse and Managed Care
Kane, Nancy M.
Functional Area(s):
   General Management
   Health Policy
Difficulty Level: Advanced
Pages: 20
Teaching Note: Not Available. 
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First Page and the Assignment Questions:


“Gee, someone really should do something about this,” exclaimed one of the health plan representatives at the conclusion of the consultant’s presentation. The Medical Advisory Board of Westinghouse Electric Corporation 1 (“WX”) had just heard a summary of the results of an analysis of treatment patterns and costs of WX employees and dependents with cardiovascular disease. The goal of the analysis, which had been commissioned by Gene Clayton, WX’s VP of Benefits in the Corporate Human Resources department and performed by outside consultants retained by WX, was to examine cardiovascular-related claims data for WX employees to identify areas where there was opportunity to lower or maintain health care costs while improving patient outcomes. Gene and his staff decided to commission the analysis largely out of their concern that WX’s managed care plans were missing many opportunities to improve quality and reduce costs. According to Gene:

Our per capita medical costs have been flat for four years but that’s not good enough. We have been building an integrated claims database for years. It has been part of our overall health care strategy—making data available that can be analyzed to develop interventions. We have been asking the vendors to take the data and use it. But none of them have used the data at all. In fact, we even gave the medical claims data to one of our vendors in 1994, but they never did anything with it. So finally we thought we had to do something. We decided to take the ball and analyze the data ourselves, with the help of outside consultants. Westinghouse should not have to be mucking about with this data—that’s . . .


  1. Exhibit 1 shows the organizational relationships between Westinghouse and its key vendors (including its two key "network management" vendors, Blue Cross of Western Pennsylvania (BCWPA) and Metlife/United). The boxes indicate the states under each vendor's responsibility. How do you think BCWPA, which is licensed to operate in Western Pennsylvania, manages the care of providers in Maryland or North Carolina? How might the BCWPA relationship to providers differ from the provider relationships of Metlife/United? How would you expect those differences to affect the ability of the network managers to deliver what Westinghouse is demanding?
  2. How should the managed care vendors respond to WX’s challenge to address the prescribing patterns detected in the cardiovascular analysis? What is realistic to promise? How can it be achieved? What types of managed care organizations are best positioned to implement such programs?
  3. Assess the opportunities and drawbacks of the different attributes of WX’s current health care benefit strategy:
    1. the integrated medical data warehouse;
    2. the elimination of all HMOs for the active employee population, and their replacement with the two medical plans (indemnity and point-of-service managed care) and five carve-outs;
    3. the charge-back system and increased benefit flexibility given to managers of the business units;
    4. increased employee cost-sharing; and,
    5. outsourcing benefit advice and management.
      How might any of these initiatives be made more effective?
      Should any of these programs/initiatives be dropped/replaced with alternatives?
  4. What do you think managed care’s value added is:
    1. in general (most plans and enrollees)?
    2. when it is achieving “state of the art”?
    3. how many managed care enrollees are in HMOs achieving “state of the art” managed care?
    4. how can employers help managed care plans advance to state of the art performance levels?
  5. If you were in Gene’s position, would you shift everyone into the indemnity product? Why/why not?

1 The Medical Advisory Board comprised the medical directors and account managers from Westinghouse’s two health care plans, a physician in private practice in Pittsburgh who consulted for Westinghouse, and several staff from the Westinghouse corporate human resources department.