CalPERS May Drop Proposal to Contract Directly with Providers
The California Public Employees Retirement System may decide today to "shelv[e]" an "innovative" proposal to bypass managed care organizations in favor of contracting directly with physicians over concerns that the switch "would not save money," the Los Angeles Times reports. As CalPERS is the nation's second-largest health benefits purchaser behind the federal government, its move toward direct contracting had been viewed as a "sign of things to come" that could "revolutionize managed care in California." However, with CalPERS facing "escalating health care costs," the system's administrators, who had been studying the proposal for two years, have said that the direct contracting proposal should either be shelved until next year -- when CalPERS intends to review all its benefits delivery strategies -- or dropped altogether. In its recommendation that the board vote down the proposal, CalPERS staff members said that with a $3 million start-up cost, direct contracting is "too expensive [and] too complicated." In a report to the system's administrators, Allen Feezor, CalPERS' assistant executive officer for health benefits, said direct contracting would mean CalPERS would "essentially have to run its own HMO," which would "require tremendous oversight." Also, the report, which included a survey of CalPERS members, found that members said they would only support direct contracting if it was offered in addition to current HMO products.
Peter Boland, a Berkeley-based health care consultant, said, "You could make the case that this is the death knell for direct contracting in California. If CalPERS decides it's not for them, who else is going to step up to the plate?" (Bernstein, Los Angeles Times, 11/14). CalPERS' June announcement that it was accepting direct contract proposals from medical groups 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, and said CalPERS "couldn't stitch together the kind of huge medical networks that the HMOs have created" (California Healthline, 6/15).
Despite cost concerns, supporters say the direct contracting plan would give employers "better control" over the quality of care provided to workers. In addition, plan supporters suggest that the elimination of the "profits and expenses of an HMO," including executives' salaries and advertising, would provide "wiggle room" in the budget to spend more on patient care. State Treasurer Phil Angelides, a supporter of the proposal and member of CalPERS' board, said he will recommend that CalPERS reconsider the proposal next year. "We have to look at how we deliver health care, and I personally believe that direct contracting should be in the mix," he said (Los Angeles Times, 11/14).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.