HMO Model Shaken but Remains Intact

Publication Date: January 2001

Publisher: Center for Studying Health System Change

Author(s): Aaron Katz; Robert E. Hurley; Leslie A. Jackson; Timothy K. Lake

Research Area: Health

Type: Report

Coverage: California

Abstract:

In January 2001, a team of researchers visited Orange County, Calif., to study that community’s health system, how it is changing and the effects of those changes on consumers. The Center for Studying Health System Change (HSC), as part of the Community Tracking Study, interviewed more than 80 leaders in the health care market. Orange County is one of 12 communities tracked by HSC every two years through site visits and surveys. Individual community reports are published for each round of site visits. The first two site visits to Orange County, in 1996 and 1998, provided baseline and initial trend information against which changes are tracked. The Orange County market encompasses an area of about 30 cities south of Los Angeles.

Despite sustained turmoil in the Orange County health care market, health maintenance organizations (HMOs) continue to dominate. The market remains unique, not only because of extensive enrollment in HMOs, but also because large physician organizations assume much of the financial risk and care management that is typically within health plans' purview. Plans, providers and consumers have been comfortable with this arrangement, so Orange County has not yet seen the shift from HMOs to preferred provider organizations (PPOs) experienced elsewhere.

Nevertheless, turmoil among physician organizations shook the market two years ago, and several recent developments continue to threaten its stability.