Research Activities, September 2013
Managed care continued to exert observable effects on hospital cost and quality in the post-managed care era
Health Care Costs and Financing
Managed care has transformed the health care landscape during the last two decades of the 20th century, but the total enrollment in HMO plans has been decreasing since 2000. AHRQ researcher, H. Joanna Jiang, Ph.D., and coinvestigators examined whether managed care and hospital competition continue to demonstrate positive effects on hospital cost and quality performance. Average hospital cost and mortality rates were analyzed from 1,521 urban hospitals located in markets with different degrees of HMO penetration. The time frame examined was between 2001 and 2005 during which there was a decline in HMO enrollment. Two market forces were measured: HMO penetration and hospital competition.
Hospitals located in areas with high competition had significantly lower mortality rates of 7 percent less in 2001 and 4 percent less in 2005. By 2005, there were also lower mortality rates for hospitals located in high HMO penetration markets. In markets with high HMO penetration, increase in hospital competition over this time period resulted in decreased mortality but no change in cost. However, in markets without high HMO penetration, increase in hospital competition over time was associated with increase in cost but no change in mortality.
These findings suggest that HMO plans may be paying more attention to quality of care than before. While managed care seems to have lost strength in slowing the growth rate of hospital costs in this post-managed care era, there continues to be differences in hospital cost performance associated with different levels of HMO penetration across markets, note the researchers.
More details are in "Hospital cost and quality performance in relation to market forces: An examination of U.S. community hospitals in the ‘post-managed care era,’" by Dr. Jiang, Bernard Friedman, Ph.D., and Shenyi Jiang, Ph.D., in the International Journal of Health Care Finance and Economics 13, pp. 53-71, 2013.
Reprints (AHRQ Publication No. 13-R036) are available from AHRQ.