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Related Experiment Videos

Selective contracting in California: experience in the second year.

L Johns, M D Anderson, R A Derzon

    Inquiry : a Journal of Medical Care Organization, Provision and Financing
    |January 1, 1985
    PubMed
    Summary

    Selective contracting in California benefits Medicaid and the private sector by reducing costs without compromising patient care quality or access. This approach is reshaping healthcare provider behavior and policy.

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    Area of Science:

    • Health Services Research
    • Health Policy Analysis
    • Healthcare Economics

    Background:

    • Selective contracting for health services is in its third year of implementation in California.
    • The model is expanding from the Medicaid program into the private sector.
    • This system aims to control healthcare costs through negotiated contracts.

    Purpose of the Study:

    • To evaluate the impact and benefits of selective contracting in California.
    • To assess the effects on the Medicaid program and the private healthcare market.
    • To determine if quality of care or patient access has been compromised.

    Main Methods:

    • Analysis of hospital contracting data with Medicaid and private payers.
    • Review of state budget allocations for inpatient services.

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  • Examination of operational Preferred Provider Organizations (PPOs) and their pricing strategies.
  • Assessment of reported changes in provider behavior and healthcare policy.

    • Main Results:

    • 274 hospitals are now under contract with Medicaid.
    • Projected state budget increase for inpatient services is only 1% for FY 1984-1985.
    • Approximately 50 Preferred Provider Organizations (PPOs) are operational.
    • Hospitals offer discounts of 10%-20% (up to 40%) to private payers.
    • PPO premiums are 10%-20% lower than indemnity rates.
    • No measurable decrease in quality or access for Medicaid patients has been observed.

    Conclusions:

    • Selective contracting benefits both the Medicaid program and the private sector in California.
    • The system incentivizes competition, leading to significant cost reductions.
    • Provider behavior has been altered, demonstrating the effectiveness of competitive strategies.
    • Selective contracting continues to be a dominant force in state health policy, with no adverse effects on care quality or access demonstrated to date.