Physician organization in California: Crisis and opportunity

Many of the 250 physician organizations that provide care to California's s ixteen million health maintenance organization enrollees are in a state of crisis, squeezed between constrained revenues, rising practice costs, and c onsumer sentiment that favors unconstrained choice over integrated delivery . Medical groups and independent practice associations are retrenching to t heir core geographic areas, reducing capitation for drug benefits and hospi tal services, and abandoning dreams of displacing health plans. Consolidati on is accelerating in some areas, as medical groups join with hospitals to extract higher payment rates from insurers and employers. The conjunction o f consumerism and premium inflation creates new opportunities for organizat ions that truly can manage health care, but the challenges roiling Californ ia's medical groups may preclude meaningful efforts to seize the initiative .