Doctors' Dilemma: How Health Care Financing Shapes Service

From 1996 to 1998, researchers at the Health Research and Education Trust, in collaboration with the Wharton School of the University of Pennsylvania, studied joint hospital and physician group efforts to create integrated service arrangements and facilitated managed care contracting.

The study provides rationale and understanding about the formation of these arrangements by assessing the effects of hospital, health market, regulatory and community characteristics on the decision to develop a physician-organization arrangement and on the selection of which type of arrangement.

This project was part of the Robert Wood Johnson Foundation (RWJF) national program Changes in Health Care Financing and Organization (HCFO).

Key Findings

  • Researchers reported the following findings in a Findings Brief available on the HCFO website:

    • Physician-hospital integration occurred in a variety of ways. These included:
      • Physician involvement in hospital governance.
      • Physician salary arrangements with hospitals.
      • Administrative and practice management services for physicians.
      • Sharing of financial risk between physicians and hospitals.
      • Creation of new services through physician-hospital joint ventures.
      • Computer linkages.
    • Hospitals and physicians receiving global capitation payments for large numbers of managed care patients achieved greater integration than when global capitation covered smaller numbers of patients.
    • The analysis did not uncover a link between integration and changes in cost of care.
    • In some cases, friction developed between physician organizations and hospital-led health systems as each negotiated arrangements with managed care organizations.