Cost and quality under managed care: Irreconcilable differences?

Managed care companies contend there is still waste in the healthcare syste m that should be eliminated. Healthcare providers argue that further cuts w ill reduce quality. Which side is right? In order to answer this question i t is necessary to determine the threshold implicit in the corollary questio n: How far can we go in reducing healthcare expense without diminishing qua lity? A new variability based methodology is proposed that has the potentia l to determine the threshold at which cost reduction will negatively impact quality. Illustrations of its specific application are provided.