Markets at Risk— Current and Future Challenges in a Managed Care Marketplace. E. Provider organization and sophistication remains problematic.


Despite more than a decade of concerted efforts to promote provider organization either by plans or by providers themselves, few models have emerged that have been successful and sustainable. Practice acquisition by hospitals, investor owned practice management companies, hospital-centered integrated delivery systems, etc. have all largely fallen by the wayside—apparently, in part, because physician desire for autonomy remains an elemental instinct, frustrating various strategic initiatives to rationalize this cottage industry. Goldsmith captures this evocatively when he suggests: “Culture eats strategy for breakfast, every time. . .”69 For health plans this lack of organization has been a two-edged sword: frustrating their ability to find strategic partners with whom to build longer term relationships, while perpetuating anxiety and uncertainty among providers who have been willing to contract with plans without clear strategic purposes.

It appears that the current influence of provider alliances and federations in developing countervailing leverage with plans suggests that the era of exploitation of anxious providers by plans may be ending. However, beyond being more effective price negotiators, these entities are often neither able nor intent on becoming more fully formed organizations that could assume greater responsibility for care management, development of information technology and infrastructure, or become a stable platform to adopt and adapt emergent treatment innovations. Consequently, health plans will face stronger and less malleable provider organizations in the future, whose strength lies principally in their ability to preserve existing modes of practice at increasingly higher prices.

  1. Christianson, J., R. Feldman, J. Weiner, and P. Drury, “Early Experience with a New Model of Employer Group Purchasing in Minnesota,” Health Affairs 18(6):100-114, 1999.