ORANGE COUNTY: PPMC Defaults Leave Market in Turmoil

      The Orange County health care market -- particularly the physician segment -- is in "disarray," according to a report by the Center for Studying Health System Change. The report highlights the key changes in the Orange County health care market since 1996 -- one of the 12 communities that the HSC is tracking over time to understand how local health care systems are changing and the impact of those changes on consumers. According to the report, physician organizations "have stumbled badly in the last two years due largely to long- term capitation agreements that were not adjusted for rising costs." HSC President Paul Ginsberg commented, "The national experiment with physician practice management companies (PPMCs) has failed. But this trend and its immense impact on the system has been more dramatic in Orange County due to the portion of the market they account for and extent of financial risk they bear, which included pharmacy benefits and hospital services in some cases." The report found that as PPMCs took on risk for a greater array of services, local health care costs grew more rapidly than expected while premiums remained relatively flat. PPMCs locked into multi-year capitation contracts were particularly hard hit. The report concludes that the failure of such high-profile PPMCs as MedPartners and FPA Medical Management have not only "raised serious concerns about who is accountable under capitated arrangements for care that is paid for but not yet delivered or reimbursed," as well as "caused unrest about patients' ability to maintain access to their regular providers" (HSC release, 6/30).