BEYOND COMPETITION

Managed care organizations often cannot be easily differentiated on th e basis of organizational characteristics. Even the provider networks that competing health plans use may be virtually identical in response to employee pressure for broad provider choice. In markets with many undifferentiated networks, current approaches to quality improvement m ay be more intrusive than helpful. Health plans should delegate qualit y improvement activities to constituent provider groups and need to ex plore collaborative approaches to quality improvement. Although many a re uncomfortable with using financial incentives to influence professi onal behavior, the use of capitation to restrain costs is inevitable. Instead of arbitrarily limiting financial incentives, consumers should be protected in market-compatible ways. In particular, expansive disc losure requirements and risk adjustment of both premiums and capitatio n payments are recommended as approaches that will reward high-quality care.