Building a vertical provider system.

There is probably no geographic area in the United States in which the health care environment is more turbulent than that of Southern California. Long before President Clinton's proposals began serious national debate on health care reform, a massive provider-driven realignment of the system was occurring in that region of the country. Multispecialty medical groups have generally led the way and have acquired ever larger managed care populations through merger and acquisition of other groups and practices. Hospitals, hampered by large fixed capital bases, have struggled to reinvent themselves as cost-effective and primary care-friendly environments in order to be attractive to managed care physicians. Almost ignored in this reconfiguration has been the university teaching hospital. This article discusses one attempt to reconcile contractually an integrated, capitated, and managed care-oriented health care system with an academic medical center in a strategic alliance.