CalPERS Considering Direct Contracts With Providers
Exploring possible ways to reduce costs, CalPERS said yesterday that it has asked nearly 100 provider groups to make "preliminary proposals" to contract directly for care given to the pension fund's members, a move that "could reduce the huge role played by HMOs and other health plans," the Orange County Register reports. CalPERS spokesperson Pat Macht said that the fund is seeking the information as a first step "toward seeing if we can alter the face of managed care as we know it." CalPERS has requested bids from 91 medical networks, hospitals and specialty care groups statewide to provide direct care, with the focus currently aimed at the 200,000 members enrolled in its two self-funded preferred provider organizations. The Register reports that CalPERS has "made clear that it is not entirely happy with the [managed care companies] that cover its other one million members." Allen Feezor, CalPERS' assistant executive officer for health benefits, said, "In the future I could envision having fewer long-term HMO partners, along with a variety of other care-managing partners such as health systems, large group practices and even specialty-disease management firms."
CalPERS' announcement, however, was met with skepticism across the health care sector. Walter Zelman, president of the California Association of Health Plans, "scoffed" at the idea of direct contracting, saying the fund "couldn't stitch together the kind of huge medical networks that the HMOs have created." Jay Cohen, president of medical group Monarch Healthcare, said that medical groups would be hesitant to sign direct contracts because of a "fear of retaliation from HMOs." Keith Wilson, CEO of Talbert Medical Group, said that physicians might be "wary" of CalPERS' "aggressive negotiat[ing]" tactics, saying, "[I]t remains to be seen whether the extra costs they think they could squeeze out of the system would be passed on to the providers of health care." Keith Bishop, an attorney who was the state's top managed care regulator under former Gov. Pete Wilson (R), said that CalPERS might be able to save money on marketing and administrative costs through direct contracting. He added, however, that patient protection could decline if managed care companies -- which, unlike physician groups, are regulated by the state -- were taken "out of the equation" (Wolfson, Orange County Register, 6/14).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.