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Related Experiment Videos

HMO penetration and physicians' earnings.

J Hadley1, J M Mitchell

  • 1Institute for Health Care Research and Policy and Department of Medicine, Georgetown University Medical Center, Washington, DC, USA.

Medical Care
|November 5, 1999
PubMed
Summary

Health maintenance organizations (HMOs) significantly reduced physicians' earnings in 1990. Increased HMO market penetration lowered both annual and hourly income for physicians, indicating a notable market impact.

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Area of Science:

  • Health Economics
  • Medical Market Analysis

Background:

  • Physician compensation and market dynamics are crucial in healthcare economics.
  • The rise of Health Maintenance Organizations (HMOs) has influenced healthcare delivery and physician reimbursement.

Purpose of the Study:

  • To determine the impact of Health Maintenance Organization (HMO) enrollment variations on physician earnings in 1990.
  • To quantify the effect of HMO penetration on physicians' annual and hourly income.

Main Methods:

  • Analysis of a nationally representative sample of 4,577 physicians under 45 years old.
  • Estimation using a partial reduced-form model for physician income.
  • Application of instrumental variables approach to address endogeneity of HMO penetration.

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Main Results:

  • HMO penetration negatively and significantly impacted physician earnings in 1990.
  • A 100% increase in HMO market penetration was associated with a 7%-10.7% decrease in annual earnings.
  • Hourly earnings decreased by approximately 6%-9% with increased HMO penetration.

Conclusions:

  • HMOs successfully reduced physician earnings in 1990, likely via reduced visits and lower payment rates.
  • Findings from younger physicians may indicate future market trends due to their susceptibility to market forces.
  • The 1990 data might underestimate current effects given recent aggressive HMO market behavior.