In This Issue

December 2003 | Bradford H. Gray

In a health care system characterized by pervasive change, few transactions have approached the scale of for-profit conversions of Blue Cross and/or Blue Shield plans. Such conversions have taken place via sales or corporate restructuring in more than a dozen states, including California and New York, and many more transactions have been proposed. Some Blue Cross/Blue Shield plans are now owned by publicly traded corporations, such as Wellpoint and Anthem. Resistance to the trend has grown in the past two years, and conversion proposals have been rejected by two states (Maryland and Kansas) and withdrawn in another (North Carolina). A group of Blue Cross plans have formed an alliance to support the continuation of the nonprofit model. The topic has generated considerable controversy.

This issue of the Quarterly begins with the most thoroughgoing assessment available of the complex issues raised by proposals to convert Blue Cross plans to for-profit organizations. In “The Impact of Blue Cross Conversions on Accessibility, Affordability, and the Public Interest,” Mark Hall and Christopher Conover present their evaluation of the effects of the series of Blue Cross conversions that began in California in 1993. Arguing that conversion is properly understood as a process rather than an event, Hall and Conover draw on interviews with key informants, original data analyses, the available literature, and evidence developed during legislative, regulatory, and judicial proceedings in various states in which Blue Cross conversions were undertaken. Their article addresses a broad range of matters potentially affected by a conversion or change in control, including the pricing, design, and marketing of products; provider contracting; medical underwriting practices; customer service and managed care methods; as well as the organization’s role in public policy and regulatory affairs. They also consider the activities of new foundations in those instances where they were created.

Hall and Conover find that conversion creates pressures to increase profitability and that this leads to changes that may be both negative and positive. But they also find little evidence of price increases that differ from overall trends or of dramatic changes in medical underwriting practices. The parties affected most adversely by conversions have been providers, because converted Blue Cross plans have forced them to offer deep discounts. Hall and Conover conclude that although the evidence is imperfect, there is little indication of harm to the affordability and accessibility of health care at the state level. They caution, however, that each conversion and each state contains unique elements, so that any proposed future conversion should be assessed on its own terms.

Conversions are also the subject of the second article in this issue. But here the organizations in question are hospitals. In “The Effect of Hospital Ownership Conversions on Nonacute Care Providers,” Deborah Gurewich, Jeffrey Prottas, and Walter Leutz examine a topic to which researchers have devoted considerable attention over the past decade. Perhaps a dozen studies have compared various aspects of hospital performance—usually financial concerns or charity care—before and after conversion. Gurewich, Prottas, and Leutz, however, offer a new conceptualization of what conversion entails, contending that hospitals should be seen as part of a “nexus of linkages” among the many entities that deliver health and social services at the community level. Before conversion, a hospital can have a collaborative, competitive, or no relationship with any given organization. The question that the researchers explore, in five case studies, is how hospital conversions affect the organizations in their networks of relationships. They also examine the extent to which conversion foundations, when they had been created, may compensate (or more than compensate) for any losses in support resulting from a conversion. The effects of conversion vary across their cases. The perspective that the authors bring to the topic is a reminder—an excellent counterexample—that a topic such as conversion should not be viewed through an excessively narrow lens.

The theme of organizational change continues in “The Rise and Fall of a Kaiser Permanente Expansion Region” by Daniel Gitterman, Bryan Weiner, Marisa Elena Domino, Aaron McKethan, and Alain Enthoven. The Kaiser plan that they describe operated in North Carolina from 1985 to 1999. Its history is of interest because it helps answer two questions of public policy importance. What has become of the prepaid group practice model—once seen by some reformers as the future of health care—that has shrunk as a share of the managed care market? And does the prepaid group practice have a future? The authors examine the North Carolina case, with its standard Kaiser model of contractual arrangements between a health plan and full-time physician groups, with an eye to its lessons for the future. Their account highlights the importance of several key factors, including the size and concentration of the market’s population, the plan’s ability to reach a large employee group such as state workers or a union, and the details of payment schemes and regulatory arrangements. Their analysis suggests that while the prepaid group practice may continue to be a model with a future, that future is limited.

This issue concludes with another in the series of papers that were commissioned by the Milbank Memorial Fund in preparation for its 100th anniversary in 2005. In “‘Evil Habits’ and ‘Personal Choices’: Assigning Responsibility for Health in the 20th Century,” Howard Leichter examines a striking parallel between the beginning and the end of the 20th century: the widespread belief that individuals were in many ways responsible for their own health problems. Leichter explores the ways that this belief played out during the two periods, and he finds the differences more intriguing than the similarities. He finds it noteworthy that as we begin the 21st century, Americans’ ability to take action to preserve their health is much greater than it was a century earlier, the scientific base underlying our ideas of personal responsibility for health status is much greater, and our attention to the social consequences of “personal” health habits has increased. Leichter also argues that the moral basis for individual responsibility for health changed from the early to late 20th century from sacred (Christian) to secular. Notwithstanding this change, he suggests, both periods tended to place responsibility more on the individual than on “society,” thus inhibiting broad efforts at public health reform. He sees this individualistic streak as deeply American.

Bradford H. Gray
Editor, The Milbank Quarterly

Author(s): Bradford H. Gray

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Volume 81, Issue 4 (pages 505–507)
DOI: 10.1046/j.0887-378X.2003.00292.x
Published in 2003