HMO Competition Research Articles

Does Competition Improve Health Care Quality?

To identify the effect of competition on health maintenance organizations' (HMOs) quality measures. Longitudinal analysis of a 5-year panel of the Healthcare Effectiveness Data and Information Set (HEDIS) and Consumer Assessment of Health Plans Survey(R) (CAHPS) data (calendar years 1998-2002). All plans submitting data to the National Committee for Quality Assurance (NCQA) were included regardless of their decision to allow NCQA to disclose their results publicly. NCQA, Interstudy, the Area Resource File, and the Bureau of Labor Statistics. Fixed-effects models were estimated that relate HMO competition to HMO quality controlling for an unmeasured, time-invariant plan, and market traits. Results are compared with estimates from models reliant on cross-sectional variation. Estimates suggest that plan quality does not improve with increased levels of HMO competition (as measured by either the Herfindahl index or the number of HMOs). Similarly, increased HMO penetration is generally not associated with improved quality. Cross-sectional models tend to suggest an inverse relationship between competition and quality. The strategies that promote competition among HMOs in the current market setting may not lead to improved HMO quality. It is possible that price competition dominates, with purchasers and consumers preferring lower premiums at the expense of improved quality, as measured by HEDIS and CAHPS. It is also possible that the fragmentation associated with competition hinders quality improvement.

Managed care competition and the adoption of hospital technology: The case of cardiac catheterization

The diffusion of health care technology is influenced by both the total market share of managed care organizations as well as the level of competition among them. This paper differentiates between HMO penetration and competition and examines their relationship to the adoption of cardiac catheterization laboratories in all non-federal, short-term general community hospitals in the U.S. between 1985 and 1995. Results show that a hospital is less likely to adopt the technology if HMO market penetration increases but more likely to adopt if HMO competition increases. Further, the latter effect is non-linear in the number of adopters. In markets where fewer than a critical number of neighboring hospitals have already adopted, the probability of adoption increases with the number of HMOs, but in markets where more than the critical number of neighbors have already adopted, the probability of adoption decreases with the number of HMOs. Thus, in markets where technology is rare, HMO penetration and competition have countervailing effects on the diffusion of technology such that the net effect could be small.

Market and Plan Characteristics Related to HMO Quality and Improvement

Existing research on health plan performance examines whether variation in plans' scores is related to enrollee and health plan traits, primarily using cross-sectional research designs. This study extends that literature by incorporating data on market characteristics using a longitudinal framework. We estimate multivariate growth models that relate plan performance on standard measures to market and HMO characteristics using an unbalanced panel of data for 1998 to 2002. We find that HMO competition is not associated with better performance or greater rates of improvement in performance on the HEDIS chronic care measures. HMO penetration, on the other hand, is positively associated with HEDIS performance in several of the chronic care process-and-outcomes measures but not with a greater rate of improvement through time. Our analysis indicates that a significant percentage of the unexplained variation in quality improvement is because of permanent, unobserved plan-level characteristics that future research should strive to identify.

Do HMO Market Level Factors Lead to Racial/Ethnic Disparities in Colorectal Cancer Screening?

Few studies have explored health care market structure and colorectal cancer (CRC) screening test use, and little is known whether market factors contribute to racial/ethnic screening disparities. We investigated whether HMO market level factors, controlling for individual covariates, differentially impact Asian American and Pacific Islander (AAPI) subjects' access to CRC screening compared with white subjects. We used random intercept hierarchical models to predict CRC test use. Individual-level survey data was linked to market data by metropolitan statistical areas from InterStudy. Insured first-degree relatives, ages 40-80, of a random sample of colorectal cancer cases identified from the California Cancer Registry: 515 white subjects and 396 AAPI subjects residing in 36 metropolitan statistical areas (MSAs). Dependent variables were receipt of (1) annual fecal occult blood test only; (2) sigmoidoscopy in the past 5 years; (3) colonoscopy in the past 10 years; and (4) any of these tests over the recommended time interval. Market characteristics were HMO penetration, HMO competition, and proportion of staff/group/network HMOs. Market characteristics were as important as individual-level characteristics for AAPI but not for white subjects. Among AAPI subjects, a 10% increase in the percent of group/staff/network model HMO was associated with a reduction in colonoscopy use (28.9% to 20.5%) and in receipt of any of the CRC tests (53.2% to 45.4%). The prevailing organizational structure of a health care market confers a penalty on access to CRC test use among high-risk AAPI subjects but not among high-risk white subjects. Identifying the differential effect of market structure on race/ethnicity can potentially reduce the cancer burden among disadvantaged racial groups.

Managed Care and Gender Disparities in Problematic Health Care Experiences

To determine whether gender differences in reports of problematic health care experiences are associated with characteristics of managed care. The 2002 Yale Consumer Experiences Survey (N=5,000), a nationally representative sample of persons over 18 years of age with private health insurance, Interstudy Competitive Edge HMO Industry Report 2001, Area Resource File 2002, and the American Hospital Association Annual Survey of Hospitals 2002. Independent and interactive effects of gender and managed care on reports of problematic health care experiences were modeled using weighted multivariate logistic regression. Women were significantly more likely to report problems with their health care compared with men, even after controlling for gendered differences in expectations about medical care. Gender disparities in problem reporting were larger in plans that used certain managed care techniques, but smaller in plans using other methods. Some health plan managed care practices, including closed networks of providers and gatekeepers to specialty care, were associated with greater problem reporting among women, while others, such as requirements for primary care providers, were associated with greater problem reporting among men. Markets with higher HMO competition and penetration were associated with greater problem reporting among women, but reduced problem reporting among men. Women reported more problems in states that had enacted regulations governing access to OB/GYNs, while men reported more problems in states with regulations allowing specialists to act as primary care providers in health plans. There are nontrivial gender disparities in reports of problematic health care experiences. The differential consequences of managed care at both the plan and market levels explain a portion of these gender disparities in problem reporting.

Do HMO penetration and hospital competition impact quality of hospital care?

This study examines the impact of HMO penetration and competition on hospital markets. A modified structure-conduct-performance paradigm was applied to the health care industry in order to investigate the impact of HMO penetration and competition on risk-adjusted hospital mortality rates (i.e. quality of hospital care). Secondary data for 1957 acute care hospitals in the USA from the 1991 American Hospital Association's Annual Survey of Hospitals were used. The outcome variables were risk-adjusted mortality rates in 1991. Predictor variables were market characteristics (i.e. managed care penetration and hospital competition). Control variables were environmental, patient, and institutional characteristics. Associations between predictor and outcome variables were investigated using statistical regression techniques. Hospital competition had a negative relationship with risk-adjusted mortality rates (a negative indicator of quality of care). HMO penetration, hospital competition, and an interaction effect of HMO penetration and competition were not found to have significant effects on risk-adjusted mortality rates. These findings suggest that when faced with intense competition, hospitals may respond in ways associated with reducing their mortality rates.

Managed Care and the Adoption of Hospital Technology: The Case of Cardiac Catheterization

The diffusion of health care technology is influenced by both the total market share of managed care organizations as well as the level of competition among them. This paper differentiates between HMO penetration and competition and examines their relationship to the adoption of cardiac catheterization laboratories in all non-federal, short-term general community hospitals in the U.S. between 1985-1995. Results show that a hospital is less likely to adopt the technology if HMO market penetration increases but more likely to adopt if HMO competition increases. Further, the latter effect is non-linear in the number of adopters. In markets where fewer than a critical number of neighboring hospitals have already adopted, the probability of adoption increases with the number of HMOs, but in markets where more than the critical number of neighbors have already adopted, the probability of adoption decreases with the number of HMOs. Thus, in markets where technology is rare, HMO penetration and competition have countervailing effects on the diffusion of technology such that the net effect could be small.

Working together? Organizational and market determinants of collaboration between public health and medical care providers.

This study examines organizational characteristics and market conditions likely to influence collaborative relationships between public health agencies and community medical care providers. Public health directors in 60 US counties were surveyed by telephone concerning their relationships with area community hospitals (n = 263) and community health centers (n = 85). Multivariate models were used to estimate the effects of organizational and market characteristics on collaboration. Collaboration was reported among 55% of the hospitals and 64% of the health centers. Certain forms of collaboration were more likely in markets characterized by higher HMO penetration and lower HMO competition. Targeted efforts to facilitate collaboration may be required in settings where institutional and market incentives are lacking.

Competition and Hospital Costs-Reply

In Reply.— Our article addressed the effects of competition on hospital behavior in California following the introduction of selective contracting and the Medicare prospective payment system program. Drs Friedman and Bogue comment on the research reported in our article and on the merits of this type of research in informing policymakers. We will respond to each point in turn. As we understand their point, Drs Friedman and Bogue suggest that the observed cost reductions by hospitals in competitive markets reflect reduced demand rather than hospital competition. They note that increasing HMO enrollment and competition from ambulatorycare providers could be reducing demand for hospital services disproportionately in competitive areas, leading to the observed reductions in costs. Although such processes could account for reductions in total inpatient costs, they do not explain the significantly lower rate of increase in unit costs (both per day and per admission) that we observed in competitive

The competitive effects of health maintenance organizations: another look at the evidence from Hawaii, Rochester, and Minneapolis/St. Paul.

There has been much discussion about the potential cost-containing impact of HMOs upon the local medical care market. Three areas have been identified by various observers as experiencing such beneficial effects: Hawaii, after the development of Kaiser in the late 1950s; Rochester, New York, which experienced rapid HMO growth and declining Blue Cross hospital use in the late 1970s; and Minneapolis/St. Paul, which has been the focus of vigorous HMO competition in the last decade. While comprehensive data on health care expenditures are not available, bits of evidence can be pieced together to develop case studies of each area. Careful review of the available data often identifies internal inconsistencies and contradictions, but in none of the three sites is there a reduction in hospital use that is most plausibly attributed to HMO competition. Instead, the reported reductions are in each case attributable to other factors--including biases in data, long-term trends predating HMOs, indirect effects of other policy changes, and other forms of competition.

The Impact of Competition and Regulation on Blue Cross Enrollment of Non-Group Individuals

Using a three-stage least squares model this article examines how Blue Cross plans compete in terms of risk avoidance when confronted with increased competition from HMO's (health maintenance organizations) and when Blue Cross rates are regulated by state insurance departments. Under both competition and regulation, it is hypothesized that Blue Cross would avoid costly, high risk individuals in order to attempt to reduce premiums to all enrollees. The statistical results suggest that the greater the HMO competition, the smaller the percentage of higher risk individuals associated with the non-group population that Blue Cross will enroll. Similar avoidance of high risk individuals is found in states in which Blue Cross rates are regulated. It is suggested that competition among insurers and rate regulation by states be closely examined by public policymakers if higher risk individuals are to be adequately insured. It has been suggested that increased competition among health insurers, HMO's and other delivery systems may take the form of risk avoidance rather than containment of excessive health care costs [27, pp. 1 10- 1 15]. Under this form of competition, insurers would avoid the costly high risk individuals in order to reduce premiums to all enrollees. Alternatively, in a competitive market, insurers may simply raise premium prices to those individuals who have experienced or may experience higher costs [28, p. 140-141]. Many