Like all organizations, managed care organizations (MCOs) must deliver value to customers, and to be sure of keeping them, ensure those customers know they have gained value. MCOs can choose any mix of insurance, protection, or experience value from particular encounters with customers, or durable value from their relationship with customers. Many have done a good job of tracking and enabling employers to appreciate the impact they have had on business performance, but few have done the same for the health and quality-of-life they deliver to consumers. MCOs already participate in the delivery of significant and enduring life value to consumers. It makes sense to track and remind consumers of the positive differences MCOs make, and thereby obtain member satisfaction, retention, and loyalty benefits, as well as image improvements for managed care as a whole. Some simple and inexpensive options for both tracking and reminding consumers are offered for consideration, including personalized annual health reports.

Responses to HMO/MCO bashing have mainly been undertaken by individual MCOs addressing individual issues. An option worth considering is to seek and justify a new image by focusing on improving the overall health and quality of life of consumer members, thereby adding value for members, providers, employers, and governments, while de-fanging media and litigators. Reasons for and examples of such a strategy are presented, together with some results of this strategy where it has been used.

Health care, like other service industries, offers products to consumers that have "durable" value--for example, a joint replacement that enables a patient to resume activities he enjoys for a many years to come. But health care organizations have done little to make use of these durable value products, writes Scott MacStravic, a principal with Demand Engineering, who argues that adopting a durable value strategic may offer a strategic advantage for health care organizations.

If managed care organizations (MCOs) think of the benefits they offer and deliver in terms of narrow insurance coverage and limited payments for carefully circumscribed lists of health services, they miss the boat in marketing to consumers. Only by identifying, promising, delivering, and ensuring that consumers perceive core psychological benefits--a sense of security against catastrophic illness, assurance of access to necessary care, and the positive impacts on quality of life that health care can create--will MCOs realize the full potential of the real benefits consumers are after.

Except for the actual duration of an outpatient visit or inpatient stay, hospitals "own" no patients at all. How can population-based performance measures be calculated for a hospital that address the value it has delivered to its patients over the past year?

Seven categories of measures are typically used by managed care organizations (MCOs) in monitoring and evaluating the effects of demand improvement efforts on their own performance: (1) member participation in specific initiatives, (2) changes in member mind-states, (3) member behavior, (4) member health status, (5) member service use, and (6) health care expenditures, as well as (7) a variety of value-adding side effects. These same seven can be even more useful to MCOs in monitoring and demonstrating the value they are delivering to their customers. The potential for the MCOs to extend the use of these parameters and gain added value for themselves thereby are discussed, and specific examples are offered to illustrate this potential.

Conventional wisdom holds that the best customers and prospects for managed care are the healthiest consumers. This is true only because of the meager extent to which premiums can be adjusted for varying risk among individuals. If a decent health/risk adjustment system were used, the best consumers for managed care to go after would be the highest-risk, highest users of health care, provided only that risk and use can be improved. The healthiest consumers have both the least potential for improvement and the least reasons for loyalty.

The "Managing" of demand practiced by managed care organizations has had some success in controlling health care expenditures, but only at great cost in terms of irate consumers, physicians, employers, media, lawyers and legislators. The spate of "HMO Bashing" can be attributed to the use of the wrong paradigm for dealing with consumer, i.e., management. Initiatives intended to avoid, replace and reform demand should use a marketing paradigm, emphasizing the delivering of value to customers. This article provides examples of the wide range of value-adding benefits that well-designed and implemented demand improvement efforts can have for the wide range of customers affected.