Physician organization in California: crisis and opportunity.

Many of the 250 physician organizations that provide care to California's sixteen million health maintenance organization enrollees are in a state of crisis, squeezed between constrained revenues, rising practice costs, and consumer sentiment that favors unconstrained choice over integrated delivery. Medical groups and independent practice associations are retrenching to their core geographic areas, reducing capitation for drug benefits and hospital services, and abandoning dreams of displacing health plans. Consolidation is accelerating in some areas, as medical groups join with hospitals to extract higher payment rates from insurers and employers. The conjunction of consumerism and premium inflation creates new opportunities for organizations that truly can manage health care, but the challenges roiling California's medical groups may preclude meaningful efforts to seize the initiative.