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HMO Resurgence in Orange County, Calif., Bucks National Trend

Workers Face Higher Health Costs as Employers Increase Patient Cost Sharing

News Release
Aug. 14, 2003

Alwyn Cassil: (202) 264-3484

ASHINGTON, D.C.—Bucking the national retreat from tightly managed care, health maintenance organizations (HMOs) continue to dominate the Orange County, Calif., health care market, according to a new Community Report released today by the Center for Studying Health System Change (HSC).

The relative stability of the Orange County market stands in stark contrast to the turmoil two years ago, when many medical groups were still reeling from the aftershocks of the collapse of national physician practice management companies. The short-lived experiment to organize physicians into very large networks ended up disrupting patient care, threatening many medical groups’ financial stability and prompting new state oversight of medical groups that accept financial risk for patients’ care.

"The resurgence of HMOs in Orange County was no accident-the health plans realized that the future of their HMO business depended on stabilizing the physician groups, and plans raised payment rates and provided management support to help stabilize the medical groups," said Paul B. Ginsburg, Ph.D., president of HSC, a nonpartisan policy research organization funded exclusively by The Robert Wood Johnson Foundation.

Other key findings of the report, HMOs Alive and Well in Orange County, which is available by clicking here, include:

  • Fast-rising HMO premiums and a sluggish economy have prompted employers to shift more health care costs to workers, potentially stimulating interest in other insurance products, such as preferred provider organizations, or PPOs, that can more readily accommodate increased patient cost sharing.
  • Hospitals’ financial health has improved, but they now face sharply rising operating costs in the face of a severe nursing shortage. Hospitals also are confronting capacity constraints, with diversion of patients from emergency departments and delays in elective surgeries common.
  • The health care safety net for low-income and uninsured people modestly improved access but faces significant threats because of California’s ongoing budget woes.

Orange County is one of 12 communities across the country tracked intensively by HSC researchers through site visits and surveys. The new report is based on a March 2003 site visit and interviews with more than 110 health care leaders, representing health plans, employers, hospitals, physicians and policy makers.

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The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely insights on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded exclusively by The Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research, Inc.


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The Center for Studying Health System Change Ceased operation on Dec. 31, 2013.