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HMO and PPO growth and hospital utilization and payment: a recursive model
T W Hu1, S D Sullivan, R M Scheffler
1School of Public Health, University of California, Berkeley.
Advances in Health Economics and Health Services Research
|December 10, 1991
Summary
Growth in Health Maintenance Organization (HMO) membership share is linked to previous year payments. Preferred Provider Organization (PPO) gains, not HMO gains, significantly reduced hospital utilization and payments.
Area of Science:
- Health Economics
- Healthcare Management
- Health Services Research
Background:
- The study examines the evolving landscape of health insurance, specifically the growth of Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs) within Blue Cross and Blue Shield Plans.
- Understanding the drivers of membership share growth and their impact on healthcare utilization and costs is crucial for healthcare policy and management.
Purpose of the Study:
- To analyze the relationship between previous year's payments and the growth of HMO membership share.
- To determine the impact of HMO and PPO membership share gains on hospital utilization and payment rates per insured member.
Main Methods:
- A recursive model was employed to analyze the growth of HMO and PPO membership share.
- Data from Blue Cross and Blue Shield Plans from 1980 to 1987 were utilized.
- Hospital utilization and payments per thousand insured members were the key metrics analyzed.
Main Results:
- A significant positive correlation was found between previous year's Plan payments and current year's HMO membership share growth.
- Significant reductions in hospital utilization and payment rates were observed as a result of PPO membership share gains.
- No significant reductions in utilization or payment rates were attributed to HMO membership share gains.
Conclusions:
- Previous year's financial performance influences HMO enrollment growth.
- PPO market penetration is a key driver for reducing healthcare costs and utilization, more so than HMO growth.
- These findings have implications for health insurers strategizing market share growth and cost containment.