By RICHARD E. SINAIKO
Amid the most sustained period of economic prosperity in American history, the health care industry has witnessed a series of high-profile financial flops. Indeed, the highly publicized difficulties of health care organizations in California and elsewhere have called into the question the “California model” of managed care.
We have witnessed the virtual collapse of the publicly owned corporate model that sought to purchase and operate physician practices while generating profits appropriate to please Wall Street (e.g., MedPartners and FPA). Efforts to build primary care medical groups by non-profit hospitals and academic medical centers are reporting losses in the millions of dollars. Many of the independent practice associations have proven largely unsuccessful as a viable financial model, primarily the result of being undercapitalized while assuming hundreds of millions of dollars of risk for patient care.
At the recent meeting of the California Medical Group Management Association in Santa Barbara, it was estimated that 80 percent to 90 percent of these managed care organizations are “technically” insolvent.
The California experience has given rise to major concerns at all levels of government, as well as among the general public. Is the continued access to quality and affordable health care for Californians in jeopardy?
Certainly, the rise of managed care and the consolidation of the industry have altered the economic structure of the health care delivery system. In the next decade, our health care regulations must adapt to this evolution as well.
So the real question is, what kind of regulation should we have? The answer that is consistently offered by voters, patients and industry observers alike is that the focus of health care regulation ought to be in assuring the public it will receive the right medical care at the right time and in the right place, provided by the right people. Because that is what Americans are demanding, that is what we must find a way to deliver.
Any future regulatory efforts must address the following:
? They must enable different elements of the system to be truly integrated economically (e.g. physicians, hospitals, skilled nursing facilities, etc.). Achieving integration today under the yoke of the current laws and regulations is virtually impossible.
? Health care organizations must have the ability to provide a return on investment for their stakeholders. California’s reimbursement structure for providers has reached levels that do not provide sufficient resources to provide and administer the scope and quality of care demanded, and meet all the itinerant conditions required.
? There must be reconciliation and coordination between the various governmental agencies dealing with these issues. Working within the myriad antitrust, legislative and regulatory mandates is not only counterproductive, but also wasteful, and ultimately may not be succeeding in protecting the patient.
? There has to be a mechanism for meaningful and mandated oversight. For example, standardized and timely reviews should be performed not only prior to the implementation of any contracts with health plans or other provider groups, but also on a regular and ongoing basis.
? To assure the parties’ respective interests are protected, neutral observers must be involved to conduct specific assessments.
If health plans fail to meet their obligations for providing this level of oversight, they then should be held liable for assuring continuing services to the affected beneficiaries as well as for the financial obligations of the failed organization.
Richard E. Sinaiko is chief executive of HPEN Inc., a Los Angeles health care consulting firm.
