The Rise and Fall of a Kaiser Permanente Expansion Region

Prepaid group practices (PGPs) multispecialty groups that vertically integrate the organization, financing, and delivery of health services to a specific population—were once viewed as the most cost‐effective and efficient model for achieving national health care reform (e.g., McNeil and Schlenker 1981 ; Saward and Greenlick 1981 ). Policy reformers who extolled the benefits of health maintenance organizations (HMOs) in the late 1970s and early 1980s emphasized in particular the cost and quality advantages of PGPs vis‐à‐vis solo and single‐specialty fee‐for‐service (FFS) providers. A comprehensive review of comparative empirical studies (HMOs versus FFS) since 1950 concluded that the total costs for HMO enrollees were 10 to 40 percent lower than those for comparable enrollees with conventional indemnity insurance ( Luft 1978 ). Although PGPs did not originate as a competitive response to fee‐for‐service indemnity health insurance, many proponents viewed them as a promising means of helping contain rising medical costs, encouraging a more rational allocation of health care resources, and improving the access to and delivery of quality services ( McNeil and Schlenker 1981 ).