Use of hospital services under two prepaid plans

This study compares the use of hospital services under two prepaid plans offered to Stanford University employees and their families. One is a Kaiser plan while under the other (Clinic plan), physician services are provided by the Palo Alto Medical Clinic, a multispecialty, largely fee-for-service group practice, and hospital services are covered by a Blue Cross policy. Using age- and sex-adjusted data, the hospital admission rate excluding deliveries is higher under the Clinic plan (44.2 admissions per 1,000 personyears compared with 38.2 under the Kaiser plan), but hospital days per 1,000 personyears are almost identical (249.8 days under the Kaiser plan, 250.7 under the Clinic plan). The difference in the admission rates is due to the higher surgical admission rate under the Clinic plan (32.4 admissions per 1,000 personyears compared to 25.0 under the Kaiser plan). However, when surgical procedures performed in the hospital on a nonadmission basis are added to surgical admissions, the surgical rates under the two plans become very close (35.7 admissions and procedures per 1,000 personyears under the Kaiser plan and 37.6 under the Clinic plan). This lends some support to the hypothesis that the lower hospital surgery rates found under prepaid group practice plans may be due as much to the group practice form of their organization as to their prepaid feature. The authors offer some possible reasons why surgeons in fee-for-service group practices may have relatively low surgery rates even though they do not have the incentive to hold down costs which surgeons in prepaid group practices have.