Capitation, Integration, and Managed Care

THE AMERICAN health care system is undergoing one of its periodic structural transitions. The fee-for-service method of paying physicians and some other hospitals is being complemented by (and, in some markets, outstripped by) contractual discounts and capitation. Managed care, in all its myriad forms, has become the insurance mechanism of choice in many places. Freestanding physician practices, group practices, hospitals, other health care organizations, and sometimes insurers are combining into systems. Some are integrated, with salaried physicians and owned hospitals; others are affiliating through extensive contractual arrangements. Large regional group practices and health systems are emerging to an extent not seen since the multihospital system boom of the 1970s. As of July 1,1995, 54 million Americans (21% of the population) were enrolled in health maintenance organizations (HMOs).1There were 593 HMOs in the United States.1Nearly three fourths of all enrollees were in independent practice association (IPA) models,