Structural problems of managed care in California and some options for ameliorating them

Of the two main types of health maintenance organizations (HMOs), IPA/netwo rk HMOs (which contract with independent practice associations (IPAs) and o ther medical groups) have grown faster than group/staff HMOs (which partner with exclusive multispecialty medical groups or employ staff physicians). However, because the IPA/network HMOs in California contract with wide and overlapping networks of physicians and hospitals in order to satisfy purcha ser demand, these arrangements suffer from inefficiencies that confound and frustrate physicians and consumers and these arrangements fail to provide the highest-quality most-economic care. This article reviews the historical context and growth of managed care in California and then delineates effic iency problems due to overlapping networks of IPA/network HMOs. The authors also review a variety of potential strategies for addressing these problem s and discuss advantages and disadvantages of each option.