How Physicians ’ Organizations Compete: Protectionism and Efficiency

Abstract This article develops a framework that distinguishes four types of com-petitive strategies that physicians ’ organizations can adopt in their interactions with health plans. Two types of strategies protect physicians ’ incomes and autonomy from incursion and control by insurers; the other two enhance the efficiency of health care markets by controlling costs and embedding physicians ’ caregiving in a community of professionals. The mix of strategies that each organization adopts at any given time depends on the market conditions and regulatory policies it faces, as well as its orga-nizational capacity. The article reviews recent developments in the field that indicate that today’s markets and regulations create neither the pressures nor the capacity for physicians ’ organizations to adopt strategies that enhance efficiency. The managed care backlash has led to a relaxation of pressures to control costs, and the lack of a business case for quality has discouraged embedded caregiving. These developments instead have encouraged and enabled physicians ’ organizations to adopt strategies that protect their members from the bargaining power and micromanagement of health plans. The article therefore proposes changes in purchasing and regulatory policies to alter the pressures and improve the capacity of physicians ’ organizations to pursue efficiency and eschew protectionism. Many physicians responded to the spread of managed care by forming or joining organizations such as medical groups, physician–hospital orga-nizations (PHOs), and independent practice associations (IPAs). Analysts initially extolled the theoretical potential of these entities to enhance th