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The End of an Era: What Became of the “Managed Care Revolution” in 2001?


  • Cara S. Lesser,

  • Paul B. Ginsburg,

  • Kelly J. Devers


Objective. To describe how the organization and dynamics of health systems changed between 1999 and 2001, in the context of expectations from the mid-1990s when managed care was in ascendance, and assess the implications for consumers and policymakers.

Data Sources/Study Setting. Data are from the Community Tracking Study site visits to 12 communities that were randomly selected to be nationally representative of metropolitan areas with 200,000 people or more. The Community Tracking Study is an ongoing effort that began in 1996 and is fielded every two years.

Study Design. Semistructured interviews were conducted with 50–90 stakeholders and observers of the local health care market in each of the 12 communities every two years. Respondents include leaders of local hospitals, health plans, and physician organizations and representatives of major employers, state and local governments, and consumer groups. First round interviews were conducted in 1996–1997 and subsequent rounds of interviews were conducted in 1998–1999 and 2000–2001. A total of 1,690 interviews were conducted between 1996 and 2001.

Data Analysis Methods. Interview information was stored and coded in qualitative data analysis software. Data were analyzed to identify patterns and themes within and across study sites and conclusions were verified by triangulating responses from different respondent types, examining outliers, searching for disconfirming evidence, and testing rival explanations.

Principal Findings. Since the mid-1990s, managed care has developed differently than expected in local health care markets nationally. Three key developments shaped health care markets between 1999 and 2001: (1) unprecedented, sustained economic growth that resulted in extremely tight labor markets and made employers highly responsive to employee demands for even fewer restrictions on access to care; (2) health plans increasingly moved away from core strategies in the “managed care toolbox”; and (3) providers gained leverage relative to managed care plans and reverted to more traditional strategies of competing for patients based on services and amenities.

Conclusions. Changes in local health care markets have contributed to rising costs and created new access problems for consumers. Moreover, the trajectory of change promises to make the goals of cost-control and quality improvement more difficult to achieve in the future.