The future of managed care organization

This paper analyzes the transformation of the central organization in the managed care system: the multiproduct, multimarket health plan. It examines vertical disintegration, the shift from ownership to contractual linkages between plans and provider organizations, and horizontal integration-the consolidation of erstwhile indemnity carriers, Blue Cross plans, health maintenance organizations (HMOs), and specialty networks. Health care consumers differ widely in their preferences and willingness to pay for particular products and network characteristics, while providers differ widely in their willingness to adopt particular organizational and financing structures. This heterogeneity creates an enduring role for health plans that are diversified into multiple networks, benefit products, distribution channels, and geographic regions. Diversification now is driving health plans toward being national, full-service corporations and away from being local, single-product organizations linked to particular providers and selling to particular consumer niches.