Market in Turmoil as Physician Organizations Stumble:

Publication Date: January 1999

Publisher: Center for Studying Health System Change

Author(s): Douglas L. Fountain; Joy M. Grossman; Roger S. Taylor; Effie Gournis

Research Area: Health

Type: Report

Coverage: California

Abstract:

In December 1998, a team of researchers visited Orange County, Calif., to study that community's health system, how it is changing and the impact of those changes on consumers. More than 40 leaders in the health care market were interviewed as part of the Community Tracking Study by the Center for Studying Health System Change (HSC) and The Lewin Group. 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 site visit to Orange County, in January 1997, provided baseline information against which changes are being tracked. The Orange County market includes approximately 30 cities that are immediately south of Los Angeles County. Orange County's health care market has undergone dramatic upheaval over the past two years, as cost pressures mounted. Area health plans have long delegated risk and medical management to physicians, leading to the emergence of large physician organizations that play a critical role in the delivery system. In 1996, physician organizations, hospital systems and several plans were implementing large-scale mergers to gain negotiating leverage and economies of scale. Between 1996 and 1998, premiums were relatively flat, despite increases in the cost of medical care. because of the high degree of capitation, physician organizations bore the brunt of the cost increases.