Effects of a faculty prepaid group practice in a pediatric primary care clinic.

Medical student and resident education at a hospital-operated pediatric primary care clinic (PPCC) was threatened by chronic financial deficits and by a state mandate that all patients receiving medical care through the state Aid to Families with Dependent Children program be enrolled in a health maintenance organization (HMO). To comply with the mandate, the PPCC was reorganized in 1984 as a faculty-operated prepaid group practice independent of the hospital. The new PPCC contracted with an HMO to provide care, with reimbursement based on capitation. The PPCC continues to serve the same patient population as before the reorganization, continues its teaching activities, and no longer has financial deficits. The experience at this clinic shows that converting to a faculty prepaid group practice can be cost-effective, promote efficiency, and improve faculty-hospital relations. Such a group practice is an appropriate organization for maintaining medical education programs while providing care in a capitation payment system.