Integrated health care, capitated payment, and quality: The role of regulation

Concerns about the effect of managed care techniques on the quality of medical care have been raised in many quarters. Physicians have advocated the reiteration of professional ethics or even the prohibition of market incentives in health care as solutions to the problem of cost-quality tradeoffs in managed care systems. However, few recognize the existing systems for the regulation of managed care or consider how additional regulation could alleviate some of the potential problems posed by market-based competition. We review the evolution and growth of managed care organizations and the payment techniques that could cause a conflict between patient welfare and physician income. We then discuss the existing types of federal and state regulation of managed care and suggest some new incentives that could buttress the ethical practice of medicine in the medical marketplace.