Canaries in a coal mine: California physician groups and competition

Health care organizations may compete by developing organized processes to improve quality and increase efficiency, or may focus on growing to increase negotiating leverage and on controlling costs through withholding appropriate care and avoiding sick patients. This paper describes key ways in which public and private policy decisions create incentives that influence the competitive focus of physician groups in California, a state in which physician groups and health maintenance organizations are prevalent. These policies do not manage competition in optimal ways: They reward groups for market leverage and controlling costs while failing to fully reward quality and efficiency.