Prepaid Group Practice and Health
Historically, one alternative to small offi ce-based, feefor-service practice became the major challenge to that
traditional model: prepaid group practice, one of the
models upon which the modern HMO is based.
In 1929, the RossLoos Clinic began to provide
medical services for employees of the Los Angeles
Department of Water and Power on a prepaid basis. By
1935, the clinic had enrolled 37,000 employees and
their dependents, who each paid $2 per month for a
specifi ed list of services. Also in 1929, an idealistic physician, Dr. Michael Shadid, organized a medical cooperative in Elk City, OK, based on four principles: group
practice, prepayment, preventive medicine, and control by the patients, who were members of the cooperative. In the late forties, more than a hundred rural
health cooperatives were founded, many in Texas, but
they tended to fade away, partly from the stiff opposition of organized medicine. In the 1950s, another version of the consumer-managed prepaid group practice
sprang up in Appalachia, where the United Mine Workers established union-run group practice clinics, each
receiving a budget from the union-controlled, coal
industryfi nanced medical care fund. Meanwhile, the
Group Health Association of Washington, DC, had
been organized in 1937 as a prepaid group practice
whose board was elected by the cooperatives membership. A few years later in Seattle, Group Health Cooperative of Puget Sound acquired its own hospital, began
to grow, and by the mid-1970s had 200,000 subscribers,
a fi fth of the Seattle-area population. In 1947, the
Health Insurance Plan of New York opened its doors,
operating 22 group practices; within 10 years, Health
Insurance Plans enrollment approached 500,000
HOW HEALTH CARE IS ORGANIZEDII
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