HMO market structure and performance: 1985-1995

This paper estimates the effect of market structure on hospital days and ambulatory visits in independent practice associations (IPAs) and group-model health maintenance organizations (HMOs) where market structure is measured by HMO penetration and the number of HMOs operating in a market. There was a steady decline in inpatient use in HMOs during the study period and a steady increase in use of ambulatory care. In multivariate analyses, inpatient use is significantly higher in IPAs, but there is no difference in ambulatory use. As HMO penetration increases and the number of HMOs increases, group-model HMOs have lower hospital use and greater ambulatory use. In contrast, use of both inpatient and ambulatory care decreases in IPAs but only at high levels of penetration and numbers of competitors.     

The impact of payor/provider type on health care use and expenditures among the frail elderly

OBJECTIVES: This study examined whether health care expenditures and usage by the frail elderly differ under three payor/provider types: Medicare fee for service, Medicare health maintenance organization (HMO), and dual Medicare-Medicaid enrollment. METHODS: In-home interviews were conducted among 450 frail elderly patients of a San Diego, Calif, health care system. Cost and use data were collected from providers. RESULTS: Analyses revealed no difference in total expenditures between fee-for-service and HMO enrollees, but Medicare-Medicaid beneficiaries' expenditures were 46.8% higher than those for HMO enrollees and 52.2% higher than those for the fee-for-service group. Fee-for-service participants were less than half as likely as HMO enrollees to have two or more hospital admissions, but hospital usage rates between those two payor/provider groups did not differ. Not were there payor/provider differences in access to home health care, but HMO home health care users received significantly fewer services than the others. CONCLUSIONS: The care provided to these HMO beneficiaries resulted in a combination of restricted home health use and higher multiple hospitalizations. This raises compelling questions for future research. For the dually enrolled, stronger cost containment may be required.     

Marketing HMOs to Medicare beneficiaries

Medicare health maintenance organizations (HMOs) market extensively to attract beneficiaries. To assess the dynamics of this marketing, this paper examines newspaper and television ads and materials from marketing seminars that are illustrative of Medicare HMOs' marketing activities in four major media markets. Lower costs and better benefits are pitched in the majority of the ads. Image and content analyses suggest that, in general, HMO ads appear to market to healthy seniors and not to the sick or to disabled persons under age sixty-five. Important plan information often appears in fine print. The study raises questions about the impact of marketing on beneficiaries' insurance choices and the challenges facing the Health Care Financing Administration (HCFA) in establishing and enforcing marketing guidelines.     

Managed care and technology diffusion: the case of MRI

A growing body of evidence suggests that managed care can reduce overall health care costs but provides little insight into how this could happen. One possibility is that managed care influences the adoption of new medical technologies. In examining the relationship between health maintenance organization (HMO) activity and market-level availability and use of magnetic resonance imaging (MRI), we find that high HMO market share is associated with low levels of MRI availability and use. This suggests that managed care may be able to reduce health care costs by influencing the adoption and use of new medical equipment and technologies.     

Access and outcomes of elderly patients enrolled in managed care

OBJECTIVE: To determine differences in access to care and medical outcomes for Medicare patients with an acute or a chronic symptom who were enrolled in health maintenance organizations (HMOs) compared with similar fee-for-service (FFS) nonenrollees. DESIGN: A 1990 household telephone survey of Medicare beneficiaries who reported joint pain or chest pain during the previous 12 months. SAMPLE: Stratified random sample of HMO enrollees (n = 6476) and comparable sample of FFS Medicare beneficiaries (n = 6381). ACCESS AND OUTCOME MEASURES: Care-seeking behavior, physician visits, diagnostic procedures performed, therapeutic interventions prescribed, follow-up recommended by a physician, and symptom response to treatment. RESULTS: After controlling for demographic factors, health and functional status, and health behavior characteristics, HMO enrollees with joint pain (n = 2243) were more likely than nonenrollees (n = 2009) to have a physician visit (odds ratio [OR], 1.19; 95% confidence interval [CI], 1.03 to 1.38) and medication prescribed (OR, 1.35; 95% CI, 1.14 to 1.60). Patients with chest pain who were enrolled in HMOs (n = 556) were less likely than nonenrollees (n = 524) to have a physician visit (OR, 0.50; 95% CI, 0.30 to 0.82). For both joint and chest pain, HMO enrollees were less likely to see a specialist for care, have follow-up recommended, or have their progress monitored. There were no differences in complete elimination of symptoms, but HMO enrollees with continued joint pain reported less symptomatic improvement than nonenrollees (OR, 0.72; 95% CI, 0.59 to 0.86). CONCLUSIONS: Reduced utilization of services for patients with specific ambulatory conditions was observed in HMOs with Medicare risk contracts, with less symptomatic improvement in one of the four outcomes studied.     

Market influences on internal medicine residents' decisions to subspecialize

BACKGROUND: Managed care reduces the demand for internal medicine subspecialists, but little empirical information is available on how increasing managed care may be affecting residents' training choices. OBJECTIVE: To determine whether increased managed care penetration into an area where residents train was associated with a decreased likelihood that residents who completed general internal medicine training pursued subspecialty training. DESIGN: Secondary logistic regression analysis of data from the 1993 cohort of general internal medicine residents. SETTING: U.S. residency training sites. PARTICIPANTS: 2263 U.S. medical school graduates who completed general internal medicine residency training in 1993. MEASUREMENTS: The outcome variable (enrollment in subspecialty training) was derived from the Graduate Medical Education Tracking Census of the Association of American Medical Colleges (AAMC). Health maintenance organization (HMO) penetration (possible range, 0.0 to 1.0; higher values indicate greater penetration) was taken from the Interstudy Competitive Edge Database. Individual and medical school covariates were taken from the AAMC's Student and Applicant Information Management System database and the National Institutes of Health Information for Management Planning, Analysis, and Coordination system. The U.S. Census division was included as a control covariate. RESULTS: 980 participants (43%) enrolled in subspecialty training. Logistic regression analyses indicated a nonlinear association between managed care penetration into a training area and the odds of subspecialization. Increasing managed care penetration was associated with decreasing odds of subspecialization when penetration exceeded 0.15. The choice of subspecialty training increased as HMO penetration increased from 0 to 0.15. CONCLUSIONS: Local market forces locally influenced the career decisions of internal medicine residents, but the influence was small compared with the effects of age and sex. These results suggest that market forces help to achieve more desirable generalist-to-specialist physician ratios in internal medicine.     

When medical group and HMO part company: disenrollment decisions in Medicare HMOs

Medicare beneficiaries who enroll in "risk contract" Health Maintenance Organizations (HMOs) are covered for services only if they are provided or approved by the HMO. Thus, their enrollment decisions involve selecting a health care delivery system and may be influenced by whether the HMO has contracts with particular providers. Disenrollment decisions, in turn, may be influenced by breaks in contracts between the HMO and its medical groups. This study examines decisions made by Medicare HMO enrollees when their HMO terminated its relationship with a major medical group; the group then signed a contract with a competing HMO. Beneficiaries were forced to choose between remaining with their HMO and switching to another provider, and switching to the competing HMO where they could keep their provider. Beneficiaries demonstrated considerable loyalty to their providers; nearly 60% switched to the competing HMO. Previous research on health care coverage decisions has been based on models which did not address consumers' knowledge, options, and information sources. In this decision context, we found that knowledge and information sources were the most important determinants of beneficiary decisions.     

A point of view: why point-of-care places are not free marketplaces

Current wisdom holds that health care is a business and "as such must abide by market principles." Most nurses are not well enough versed in economic theories to credibly critique health care delivery decisions based on economic theories. The relationship of market principles to health care realities is described in basic terms to encourage nurses to "optimize patient care and influence health care policy." Physicians, who control all access points to the health care system, have enjoyed a 40-year market dominance that is "rapidly being replaced by insurance companies and for-profit investors." Providers' decisions to treat or not to treat are strongly influenced by whether the patient is in a fee-for-service or capitated payment environment.     

Myelin splitting, Schwann cell injury and demyelination in feline diabetic neuropathy

This paper presents a theoretical framework to predict the effects that may arise from mergers in the rapidly-growing Medicare HMO market. We argue that mergers of large Medicare HMOs should be targeted for antitrust investigation because there are significant barriers into this market. The recent merger of PacifiCare and FHP is used to illustrate the potential antitrust issues raised by Medicare HMO mergers.     

Medicare reform: who pays and who benefits?

As Medicare's share of federal spending and gross domestic product (GDP) rises, the program may have increasingly important consequences not only for the health of Americans but also for their net income and financial well-being. We use incidence analysis to study payments and benefits in Medicare to various generations and income groups. We find that Medicare actually provides larger net dollar transfers to wealthier beneficiaries, although the "insurance value" of these dollars is greater for low-income households. We then evaluate a range of proposed Medicare reforms with regard to their impact on the distribution of both health care and disposable income.     

Reexamining the delivery system as part of Medicare reform

Medicare is more than a payment system. As the nation's largest public payer of health care, Medicare dictates the way health care is delivered to elderly and disabled persons. Health care and health outcomes cannot make substantial improvements until the delivery system is changed. Medicare reform must support a coordinated health care delivery system (in place of hospital-centered, fragmented care) and proactive chronic disease management (in place of episodic, reactive care). Consumers, government, community-based agencies, employers, health plans, and others need to develop a shared understanding of what outcomes we want to obtain, what delivery system reforms are required, and how financing can support those reforms.     

Dynamic cost shifting in hospitals: evidence from the 1980s and 1990s

The purpose of this paper is to determine whether dynamic cost shifting occurred among acute care hospitals during the period from the early 1980s to the early 1990s and, if so, whether market factors affected the ability to shift costs. Evidence from this study of California acute care hospitals during three time intervals shows that the hospital did practice dynamic cost shifting, but that their ability to shift costs decreased over time. Surprisingly, hospital competition and HMO penetration did not influence cost shifting. However, increasing HMO penetration (measured as the HMO percentage of hospital discharges) did decrease both net prices and costs for the early part of the study, but later was associated with increases in both.     

How access to long-term care affects home health transfers

This study examines the determinants of home health use after hospitalization for acute illness for eleven diagnosis-related groups (DRGs) in 1985, drawing on data from four primary sources: Medicare hospital bills, Medicare home health bills, the Medicare and Medicaid Automated Certification System files, and the American Hospital Association Survey. Separate Tobit models are estimated for each DRG. The analysis shows that transfers to home health care are heavily influenced by the hospital's long-term care arrangement and by conditions in local nursing home and home health care markets. Especially important is whether a hospital has its own long-term care unit, swing beds, or both, and whether nursing home beds are available in the local area. Patients discharged from hospitals are more likely to use home health care in areas with a low supply of nursing home beds and low Medicaid reimbursement levels for skilled nursing facilities. The results of this study have implications for proposals to extend Medicare's Prospective Payment System for hospital services to include postacute care. Proponents of a "bundled payment" that encompasses both acute and postacute services argue that the current system leads to inefficiencies and inequities. This analysis points to systematic relationships between home health and nursing home services, which should be factored into the development of a bundled payment policy.     

The impact of health maintenance organization penetration on the use of hospitals that serve minority communities

OBJECTIVES: Health maintenance organization (HMO) penetration has made hospital markets more price competitive. Hospitals in minority communities may be at a competitive disadvantage because they serve patients who are, on average, sicker and more likely to be uninsured or underinsured. This study estimated the impact of HMO penetration on the use of hospitals in minority communities during 1987 to 1992. METHODS: Using a sample of 1,413 short-term general hospitals from the 85 largest metropolitan statistical areas, the determinants of hospitals' patient volumes were estimated. Hospitals located in predominately nonwhite neighborhoods were designated minority hospitals, and other hospitals were designated nonminority hospitals. Using regression analysis, the impact of HMO penetration and concentration on hospitals' patient volumes were estimated. By interacting the HMO penetration and concentration variables with a minority hospital indicator variable, HMOs' impact on minority hospitals was calculated. RESULTS: Health maintenance organization penetration was correlated with lower patient volumes in minority hospitals and higher patient volumes in nonminority hospitals. Competition in HMO markets was correlated with lower patient volumes for all hospitals. This effect was stronger for minority hospitals. CONCLUSIONS: These findings suggest that minority hospitals may be at risk of losing patients as HMO penetration increases.     

Do Medicare HMOs cost shift?

We tested the hypothesis that health maintenance organizations (HMOs) increase their commercial premiums when Medicare pays less. Such a linkage would be taken as evidence of "cost shifting." Other studies have tested the cost-shifting hypothesis among health care providers, but this is the first to examine the HMO industry. Our data consisted of annual observations on all HMOs that operated in the United States between 1990 and 1995 and had a Medicare risk contract. A comparison group of HMOs that had no Medicare contract during that period also was analyzed. The main finding from this study is that HMOs have not shifted costs from Medicare to commercial premiums. This results supports the skeptical consensus that is developing toward the cost-shifting hypothesis. Additional findings include the negative effects of competition and for-profit status on HMOs' commercial premiums.     

Which types of hospital mergers save consumers money?

This study analyzes the changes in costs and prices from 1986 to 1994 for more than 3,500 U.S. short-term general hospitals, including 122 horizontal mergers. These mergers were generally financially beneficial to consumers, providing average price reductions of approximately 7 percent. Merger-related price reductions were considerably less in market areas with higher market concentration levels. Merger-related price reductions in areas with higher penetration by health maintenance organizations (HMOs) were approximately twice those in areas with lower HMO penetration. Merger-related price reductions were greater for low-occupancy hospitals, nonteaching hospitals, nonsystem hospitals, similar-size hospitals, and hospitals with greater premerger service duplication.     

Health maintenance organization penetration and general hospital psychiatric services: Expenditure and utilization trends.

Expenditures for inpatient and outpatient psychiatric services provided through general hospitals and the utilization of those mental health and substance abuse services through general hospitals is examined for all states grouped by level of health maintenance organization (HMO) penetration. Between 1983 and 1990, outpatient use for general hospitals increased substantially for the high-HMO group but decreased in the low-HMO group. During the same time period, per capita expenditures for inpatient and outpatient psychiatric services grew fastest in low-HMO areas. These findings suggest that HMOs restrain the growth of general hospital psychiatric expenditures and encourage the growth of outpatient alternatives to inpatient treatment. (PsycINFO Database Record (c) 2010 APA, all rights reserved)     

Federal impact on psychology in medical schools.

The impact of federal legislation on medical education and in turn on the role of psychology in that process is examined, and the efforts of psychology to impact legislation are reviewed. The federal Medicare program, and its consideration of the functions and costs of medical education under the prospective payment system for hospital care, is examined in detail. Psychologists can no longer maintain the expatriate role with which they have been content in medical schools and must assume a more responsible and proactive role. Psychologists must increase their involvement in the administrative and fiscal activities of medical colleges and universities and their understanding and advocacy efforts regarding the federal legislative issues that affect health care and medical education. (PsycINFO Database Record (c) 2011 APA, all rights reserved)     

Trends in medical care costs--evolving market forces

Slower growth in medical care costs has been the culmination of lower inflation and significant changes to the U.S. health care system, primarily the movement toward managed care. National health expenditures rose just 4.4 percent in 1996 - the smallest growth since the beginning of the national health expenditure data series. This is also true for the 35 percent gain recorded during 1992-96. The medical care Consumer Price Index (CPI) rose just 2.8 percent in 1997 and was only one-half of a percentage point above the overall CPI. The reduction in spending growth is most evident in hospital expenditures, which clearly reflects the expansion of HMO enrollment in both the private and public sectors. While the issue of quality of care is receiving more attention, this is unlikely to alter the basic direction of health care in the near-term. Cost is likely to remain a dominant factor in shaping the market forces that have significantly changed the delivery and financing of health care. Although trending upward, growth in medical spending is expected to remain relatively moderate as we move into the next century.