CalPERS: May Bypass HMOs And Try Direct Contracting

      The California Public Employees' Retirement System (CalPERS) "is considering circumventing its long-entrenched [HMOs] and contracting directly with groups of physicians and hospitals," according to the agency's health benefits administrator. In addition, the New York Times reports that Margaret Stanley said Friday that her agency would rather pay more "to those who provide the best quality care." CalPERS thinks "cutting out the middleman" may be a way to "directly affect quality and control costs," Stanley told "doctors and health system executives." She said that while "consideration of the shift would be cautious," CalPERs officials were "impressed" with the success of the Minnesota-based Buyers Health Care Action Group, "the nation's one functioning practice of such direct contracting."

More Bad News For HMOs
      Stanley also said that CalPERS, which serves over a million state employees, "was considering terminating" its HMOs' "rights to unilaterally raise the prices they charge for prescriptions." She said that some of the HMOs in the state have "their eyes on Wall Street," rather than patients. The Times notes that CalPERS' moves are particularly "noteworthy" because not only is it the nation's second biggest contractor for health care, but because "California ... is the cradle of a managed care industry" (Kilborn, 3/22).