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Understanding the Alphabet Soup of Managed Care Integrated Delivery Systems

A Workshop for Senior State Officials

This workshop was designed to address the information needs of State and local policymakers and program administrators who have responsibility for providing oversight of and contracting with integrated health care delivery systems. It was held in Philadelphia, Pennsylvania, October 14-16, 1998.

About the Workshop Sponsor.


In recent years, tremendous changes have taken place within the U.S. health care system—changes that have affected, to one degree or another, the manner in which most Americans receive their health care. One of the most significant of these changes is the fact that, in an attempt to reduce costs and receive greater value for their health care dollar, public and private sector purchasers have moved an increasingly greater proportion of the population into "managed care" arrangements.

In response to purchaser demands for cost controls, increased accountability, and more information on quality, managed care organizations (MCOs) have been forming, consolidating, and expanding into most health care markets across the country. However, even as managed care becomes the Nation's dominant form of health care delivery, it is neither clearly defined nor static. The term "managed care organization" has come to include everything from health maintenance organizations (HMOs) and preferred provider organizations (PPOs) to utilization review firms and managed care companies specializing only in behavioral health care. In turn, each of these organizational types continue to evolve in response to demands from the marketplace. For example, more traditional HMOs are developing point-of-service (POS) products to give enrollees a greater choice of health care providers.

In many communities, providers are beginning to form networks to compete for managed care contracts. These new organizations are adding more acronyms to the health care lexicon: physician-hospital organizations (PHOs), provider-sponsored organizations (PSOs), integrated service networks (ISNs), and community care networks (CCNs). For purposes of this workshop, we call these network arrangements integrated delivery systems (IDSs) to emphasize one of their primary goals.

More important than the names they are called is the promise IDSs offer for more coordinated care across the continuum of health services and settings, as well as the challenging set of questions they present to policymakers:

  • How much financial risk can they assume?
  • Should they be allowed to contract directly with purchasers on a risk-basis?
  • How can their quality of care be assessed and assured?
  • What strategies are most appropriate for regulating these entities?

Beyond these immediate concerns lies an even bigger unknown:

  • Will these organizations ultimately evolve into more traditional HMOs or will they retain their role as partners with, or perhaps competitors to, these HMOs?


This two and a half day workshop was designed to help participants understand the function of provider-sponsored integrated delivery systems (IDSs) in a managed care system and examine issues associated with State roles in overseeing and purchasing services from them. The workshop sought to help participants develop rational approaches to the public policy issues raised by the emergence of these systems for States.

The specific objectives of the workshop were to:

  • Review recent trends in the managed care marketplace and explain how the development and growth of IDSs fit into the context of these changes.
  • Identify and discuss key issues for States as they consider whether and how to license, regulate or otherwise sanction certain types of IDSs, especially those that assume financial risk.
  • Identify key issues for consideration by State agencies that may be purchasing care from IDSs.
  • Assess the implications of the provisions of the Balanced Budget Act authorizing Medicare PSOs and Medicaid-only Managed Care Organizations (MCOs).
  • Explore issues for State government associated with the development of IDSs in rural areas.
  • Discuss the experiences of individual States that have sought to develop broader strategies concerning the State's roles with respect to IDSs.

The AHCPR User Liaison Program designed this workshop to assist State health officials in addressing these and other pressing issues related to IDSs. The purpose of the workshop was not to prescribe what policies these officials should adopt in this area; however, it was intended to enable the officials who attend to make more informed decisions about these issues.


The participants for this workshop included senior policymakers in legislative and executive branches of State government and local health officials who wanted to enhance their understanding of IDSs and make informed decisions about their purchasing and oversight roles.

Workshop Sessions


The User Liaison Program (ULP) disseminates health services research findings in easily understandable and usable formats through interactive workshops. Workshops and other support are planned to meet the needs of Federal, State, and local policymakers, and other health services research users, such as purchasers, administrators, and health plans.

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