The Impact of Prepaid Group Practice on American Medical Care: A Critical Evaluation

• Author: Merwyn R. Greenlick
• Published date: 01 January 1972
• Date: 01 January 1972
• DOI: http://doi.org/10.1177/000271627239900112
• Subject Matter: Articles

The Impact of Prepaid Group Practice on American
Medical Care: A Critical Evaluation
By MERWYN R. GREENLICK
ABSTRACT: This paper examines the concept of prepaid
group medical practice, evaluating its principles and assessing
the relevant data. Various features of this health care alterna-
tive are shown to offer potential for control of quality and
efficiency. Group medical practice has been shown to reduce
hospitalization rates and to diminish markedly what can be
viewed as unnecessary surgery. Judging from the high pro-
portion of eligible members who receive some form of care each
year, accessibility seems to be improved. The use of appro-
priate preventive services by the members seems higher than
in other types of medical care arrangements. To some extent
this system appears to minimize the duplication of effort,
personnel, and facilities that characterizes the individual fee-
for-service system. In terms of over-all cost savings and
the ability to provide high quality care with patient satisfac-
tion, prepaid group practice seems to offer major advantages
over other systems. The paper examines its efficiency from
the standpoint of the requirements necessary to provide service
to an entire population.
Merwyn R. Greenlick is Director of the Health Services Research Center, Kaiser
Foundation Hospitals, Portland, Oregon. Since joining Kaiser in 1964 he has been
involved in the establishment of an extensive research program in medical care organiza-
tion. Dr. Greenlick received his Ph.D. in medical care organization from the University
of Michigan in 1967. He currently serves as Adjunct Professor of Sociology at Port-
land State University and as Associate Clinical Professor of Preventive Medicine at the
University of Oregon Medical School. He is consultant to a number of state and na-
tional research projects and is a member of the National Academy of Sciences Institute
of Medicine.
The author wishes to acknowledge gratefully the contributions to the preparation of
this paper by Stephen M. Engel, Donald K. Freeborn, Arnold V. Hurtado, Joseph F.
Jones, and Clyde R. Pope.
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101
ALTHOUGH all quarters of Ameri- The problem [the provision of good medical
can
society appear to have
care] will not solve itself through the opera-
achieved
tion of undirected economic forces. Some
consensus that the American
conscious redirection of medical
medical
activities
care system is in the throes of
is needed, and long-term planning with a
a significant, perhaps fatal, crisis, much
clear vision of the objectives to be
controversy remains concerning the al-
achieved. The ways and means of achiev-
ternatives.
ing these objectives can be discovered
The prepaid group practice (PGP)
only by the process of actual experimenta-
model has been put forth by a number
tion in particular communities.
of social critics as the panacea for the
The actual provision of adequate medical
diseases of the system, and accepted at
care must therefore wait upon a practical
solution
many levels of national policy planning.
of the problems of economic or-
The Nixon Administration indicates its
ganization, in which the questions of cost
and the means of
acceptance by its present push to aid the
payment are paramount.
It involves also the solution of difficult
establishment of &dquo;health maintenance
problems of technical organization, which
organizations&dquo; as a keystone of its na-
will assure not only quantitative sufficiency,
tional health program. At the other end
but above all the quality of service which
of the center of the political spectrum,
can be realized only by the maintenance of
Senator Kennedy has characterized his
the traditionally high standards of the
national health insurance proposal as
medical professions.’
revolutionizing the American medical
Thirty-five years after the publica-
care system, essentially because of its
tion of the Lee-Jones study, the
potential
report
support for &dquo;comprehensive
of the National
health service
Advisory Commission
organizations&dquo; which
on Health Manpower was issued. This
closely resemble prepaid group practice
commission was established because it
plans. The American Hospital Associ-
was abundantly clear that a crisis was
ation’s proposal, the so-called Ameri-
evident in health
plan, is built around
care, that costs were
an organizational
rising astronomically, and that man-
innovation labeled &dquo;health care corpora-
tion.&dquo;
Each of these alternatives
power necessary to fulfill demand in the
ap-
present system was not available. The
pears to have been derived directly from
commission reported
the
essentially the same
concept of prepaid group practice.
problems as reported earlier
It is somewhat ironic that
by the
a develop-
CCMC. The report
ment that has remained
very clearly pro-
on the periphery
claimed a health crisis, pointing out:
of the health care field for more than
thirty-five years has recently been ac-
The crisis, however, is not simply one of
cepted by
numbers. It is
a significant number of social
true that substantially in-
creased numbers of health
planners as the answer to America’s
manpower will
be needed over time.
But if additional
health care problems. Thus, it is in-
personnel are employed in the present
teresting to trace the development of
manner and within the present patterns and
this concept to its sudden pre-eminence
&dquo;systems&dquo; of care, they will not avert, or
as the technique promising to reorganize
even perhaps alleviate, the crisis.
Unless
effectively the medical care system.
1. Roger I. Lee and Lewis Webster Jones,
The classic Lee-Jones study, under-
The Fundamentals of Good Medical Care:
taken under the auspices of the Com-
An Outline of the Fundamentals of Good
mittee
Medical Care and An Estimate
on the Cost of Medical Care
of the Service
Required to Supply the Medical Needs of the
(CCMC) and published in 1933, pointed
United States (Hamden, Ct.: Archon Books,
out that:
1962), p. 127.

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102
we improve the system through which
These symptoms have become particu-
health care is provided, care will continue
larly troublesome because, while the
to become less satisfactory, even though
concept that medical care is a right of
there are massive increases in cost and in
the American citizen is becoming gen-
numbers of health personnel.2
2
erally accepted throughout American
It was probably the report of this com-
society, there is considerable disagree-
mission, outlining significant efficiencies
ment
t over the techniques needed to
possible in prepaid group practice, that
implement it. But the attempts to im-
started the band wagon of a precipitous
plement this right have brought to light
movement espousing this concept as a
the significant diseconomies and dys-
solution to major problems of the health
functions of the present system.
care system.
Three general principles can be used
What is there about prepaid group
to evaluate any proposal for changing
practice that suggests it can help solve
the system: (1) All those who need
the problems that are staggering the
medical care should have equal access
health care system? Are these hopes
to it; (2) all services provided should
realistic?
be precisely appropriate to the needs of
Ernest W. Saward, who was the medi-
the patients; and (3) services should be
cal director at the Kaiser Foundation,
provided by the most efficient, economi-
Portland, for more than twenty-five
cal use of scarce medical resources. In
years, has suggested that the organiza-
other words, prepaid group practice or
tional problems in the system appear
any other proposed alternative can be
correctable by the development of pre-
evaluated within the American medical
paid group practices.3 He identifies six
care system by assessing the impact of
particular symptoms created by these
expected changes in terms of effective-
problems:
ness, efficiency, and accessibility.
1. The cost of medical care is high
DEFINITION OF PREPAID GROUP
and rising;
PRACTICE
2. There are no standards of quality
in personal health services;
Before evaluating the prepaid group
3. There appears to be a problem of
practice concept in terms of its potential
manpower supply;
impact on the American medical care
4. There is an obvious technology
system, it is necessary to define its es-
gap in medicine;
sential characteristics.
This is prob-
5. There exists a gap between the
lematic because various organizational
expectations of the public concern-
forms have been referred to as prepaid
ing health services and what they
group practice systems-ranging from
actually receive;
very large, highly organized medical
6. There is a lag in the use of con-
care plans to loose arrangements be-
temporary planning, budgeting,
tween providers of care and prepayment
and management skills in the or-
arrangements covering only a few peo-
ganization of medical care.
ple. The model most frequently raised
in contemporary discussion resembles
2. Report of the National Advisory Com-
the Kaiser-Permanente medical care
mission on Health Manpower, vol. 1, Novem-
sys-
ber, 1967 (Washington: U.S. Government
tem. The focus has been on the Kaiser
Printing Office, 1967), p. 2.
system because of its growth-it now
3. Ernest W. Saward, "The Relevance of
serves more than two million members
Prepaid Group Practice to the Effective Deliv-
in the United States-and because of its
ery of Health Services," The New Physician,
18 (January, 1969), pp. 39-43.
apparent efficiencies and...