Big Challenges for Managed Care

In the last two months, five major physician groups have failed, disrupting health care for hundreds of thousands of Southern Californians.

The failures have led the state’s fledgling Department of Managed Health Care to search for new ways of paying and organizing the groups, which act as middlemen between HMOs and doctors, paying for patient care out of a set monthly fee from the health plans.

Department director Daniel Zingale has proposed that medical groups be required to keep a certain level of cash reserves and to regularly estimate the sums owed to doctors who have not yet sent in their bills. In a measure of the depth of the current problem, the groups would have to pay doctors within four months of receiving their bills.

These are very modest steps. If Zingale is to solve the underlying problems he will have to make more substantive changes.

The California Medical Assn. has been pressing Zingale to increase state oversight of both HMOs and physician groups, to make certain that payments intended for doctors are not being pocketed by bureaucrats. Zingale should follow a sensible if long-ignored monitoring plan put forth by a state task force that Alain Enthoven, a Stanford University professor and managed-care pioneer, chaired for then-Gov. Pete Wilson in 1998. The task force recommended that the state closely monitor the fiscal solvency of physician groups, weeding out the weaker ones to ensure that the stronger ones survived. However, Zingale should also implement a second recommendation from the task force that many doctors have been slower to embrace: requiring all health plans in the state to disclose extensive information on the medical success rates, or outcomes, of physicians.

When solid data on medical quality exist, it will be possible for the state, physician groups and HMOs to award bonuses not just for saving money but for saving and bettering lives. Businesses would be able to make better choices for employee health care, and individuals could make informed decisions that took into account both quality and price.

Currently, data on medical quality, when gathered at all, are too often kept secret. But such data have been central to success at big HMOs like Kaiser Permanente, which offers bonuses to employees if the department in which they work shows improved medical results or offers service that is rated highly by patients.