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Modifying managed competition to address cost and quality

¹Institute for Health Policy Studies, University of California, San Francisco, USA.

Health Affairs (Project Hope)

|January 1, 1996

Summary

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California

Area of Science:

Health Services Research
Healthcare Policy
Health Economics

Background:

California's healthcare market is shifting from unregulated competition to managed competition.
Large purchasing organizations are emerging to influence market dynamics.

Purpose of the Study:

To analyze the transformation of California's healthcare marketplace.
To examine the strategies employed by large purchasing cooperatives.

Main Methods:

Analysis of purchasing cooperatives like Pacific Business Group on Health, California Public Employees Retirement System, and Health Insurance Plan of California.
Review of risk adjustment strategies, including demographic and high-cost case adjustments.
Assessment of focus on quality and process of care.

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Main Results:

Purchasing cooperatives are driving price-conscious competition among health maintenance organizations.
Risk adjustment methods have evolved to include complex cases like AIDS and liver transplants.
Increased attention is being paid to the quality and process of healthcare delivery.

Conclusions:

California's healthcare market is increasingly characterized by managed competition.
Purchasing cooperatives play a significant role in shaping market competition and quality of care.
Advanced risk adjustment is crucial for equitable competition in the evolving healthcare landscape.