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The determinants of HMOs' contracting with hospitals for bypass surgery
Darrell J Gaskin1, José J Escarce, Kevin Schulman
1Department of Health Policy and Management, Johns Hopkins Bloomberg School of Public Health, Baltimore, MD 21205, USA.
Insights
Health Maintenance Organizations (HMOs) consider hospital quality and geographic convenience when selecting providers for coronary artery bypass surgery (CABG). Cost is also a factor, particularly for Independent Practice Association (IPA)-model HMOs.
Area of Science:
- Health Services Research
- Health Economics
- Health Policy
Background:
- Health Maintenance Organizations (HMOs) utilize selective contracting with healthcare providers as a cost-containment strategy.
- Concerns exist regarding whether cost-saving measures in selective contracting compromise patient care quality.
Purpose of the Study:
- To identify factors influencing HMOs' selective contracting decisions for coronary artery bypass surgery (CABG).
- To determine the impact of hospital quality, cost, and accessibility on HMOs' provider network choices.
Main Methods:
- Logistic regression analysis was employed to model HMO contracting decisions.
- Data were derived from a 1997 national survey of 50 HMOs and 447 potential hospital partners.
Main Results:
- Hospital quality and geographic convenience positively influenced HMO contracting probability.
- Hospital costliness negatively impacted contracting, with a more pronounced effect on Independent Practice Association (IPA)-model HMOs.
- Increased HMO competition correlated with broader hospital networks, while increased hospital competition led to more restricted networks.
Conclusions:
- HMOs balance quality, convenience, and cost in their contracting strategies.
- The influence of quality and cost varies among different types of HMOs.
- Market competition dynamics shape the breadth of HMO provider networks.
Objective:
Selective contracting with health care providers is one of the mechanisms HMOs (Health Maintenance Organizations) use to lower health care costs for their enrollees. However, are HMOs compromising quality to lower costs? To address this and other questions we identify factors that influence HMOs' selective contracting for coronary artery bypass surgery (CABG).
Study Design:
Using a logistic regression analysis, we estimated the effects of hospitals' quality, costliness, and geographic convenience on HMOs' decision to contract with a hospital for CABG services. We also estimated the impact of HMO characteristics and market characteristics on HMOs' contracting decision.
Data Sources:
A 1997 survey of a nationally representative sample of 50 HMOs that could have potentially contracted with 447 hospitals.
Principal Findings:
About 44 percent of the HMO-hospital pairs had a contract. We found that the probability of an HMO contracting with a hospital increased as hospital quality increased and decreased as distance increased. Hospital costliness had a negative but borderline significant (0.10 < p < 0.05) effect on the probability of a contract across all types of HMOs. However, this effect was much larger for IPA (Independent Practice Association)-model HMOs than for either group/staff or network HMOs. An increase in HMO competition increased the probability of a contract while an increase in hospital competition decreased the probability of a contract. HMO penetration did not affect the probability of contracting. HMO characteristics also had significant effects on contracting decisions.
Conclusions:
The results suggest that HMOs value quality, geographic convenience, and costliness, and that the importance of quality and costliness vary with HMO. Greater HMO competition encourages broader hospital networks whereas greater hospital competition leads to more restrictive networks.