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Hospitals contracting with managed care.

M Zhang1

  • 1University of Arkansas for Medical Sciences, Little Rock 72205, USA.

Journal of Hospital Marketing
|December 9, 1994
PubMed
Summary
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Managed care enrollees, like those in health maintenance organizations (HMOs) and preferred provider organizations (PPOs), show lower healthcare use and costs. This study found hospital characteristics, not lower costs, influence HMO/PPO contracts.

Area of Science:

  • Health Services Research
  • Healthcare Economics
  • Hospital Management

Background:

  • Managed care organizations (MCOs), including health maintenance organizations (HMOs) and preferred provider organizations (PPOs), are associated with lower healthcare utilization and expenditures compared to traditional fee-for-service plans.
  • Existing research has primarily focused on enrollee-level factors, with limited investigation into provider-level characteristics that might explain these cost and utilization differences.
  • Understanding provider participation in managed care networks is crucial for explaining cost variations.

Purpose of the Study:

  • To investigate whether lower-cost hospitals are more likely to contract with HMOs and PPOs.
  • To determine if hospital cost differences explain the observed lower utilization rates and expenditures among managed care enrollees.
  • To identify specific hospital characteristics associated with contracting with managed care organizations.

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Main Methods:

  • A logistic regression model was employed to analyze data from the 1988 American Hospital Association (AHA) Annual Survey of Hospitals.
  • The study examined the relationship between hospital characteristics and the likelihood of contracting with HMOs and PPOs.
  • Key hospital attributes analyzed included ownership (private vs. public), teaching status, accreditation, case mix index, and geographic location (Metropolitan Statistical Areas - MSAs).

Main Results:

  • Hospitals that are privately owned, are teaching hospitals, are accredited by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), have a high case mix index, or are located in MSAs were found to be more likely to contract with HMOs and PPOs.
  • The study did not find evidence that hospitals with these characteristics necessarily have lower costs.
  • If these contracting hospitals are, in fact, higher-cost providers, then hospital costs cannot explain the lower utilization and expenditures observed in managed care enrollees.

Conclusions:

  • The findings suggest that hospital characteristics, rather than lower hospital costs, are associated with managed care contracting.
  • The observed lower utilization and expenditures by managed care enrollees are not explained by the tendency of lower-cost hospitals to join these networks.
  • Further research is needed to explore other potential drivers of cost and utilization differences in managed care settings.