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The California Model

The California Model Of Physician Contracting

In the California market, where the practice of capitated payment to physician groups first flourished and still dominates the managed care landscape, this paradigmatic mechanism is found to be under siege. "The crisis has swept through every form of physician organization," writes James Robinson in the first of three papers on this topic. He describes underwriting perils; "diseconomies of scale"; a consumer revolt that has put medical groups "on the wrong side of history"; and "the unraveling of the sense of joint destiny" that once existed between health plans and physician groups. An underlying conflict between the organizational imperative of growth and the professional traditions associated with small-group practice threatens to unhinge the California model, he suggests.

Next, Lawrence Casalino examines regulatory and market factors that have reinforced the growth imperative and created incentives that "reward groups for market leverage and controlling costs while failing to fully reward quality and efficiency." Casalino, with Robinson as coauthor, measures the California experience against another early aspiration of the managed care movement: to create a "business case for quality" by better managing the quality of coordination of care as well as the cost and use of services—a vision that has not materialized.

Rounding out the California studies, all originally presented at a January 2001 roundtable sponsored by the California HealthCare Foundation, Meredith Rosenthal and colleagues document in detail the scope and shape of capitation arrangements from detailed 1999–2000 interviews with more than 150 physician groups. The underlying trend toward larger size but less organizational integration is echoed in their findings, amid relentless financial pressures.

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