Working Paper: NBER ID: w13775
Authors: Yuchu Shen; Vivian Wu; Glenn Melnick
Abstract: We analyze the role of three aspects of HMO market structure -- HMO penetration, HMO plan concentration, and HMO for-profit share on explaining hospital cost and revenue growth during the HMO expansion period (1994-1999) and backlash period (2000-2005). We find that HMO penetration effects differ over time: a 10 percentage point increase in HMO enrollment leads to 2.5 percent reduction in cost and revenues in the expansion period but only 0.4-1 percent reduction in the backlash period. Furthermore, this HMO backlash effect can be attributed to HMO dis-enrollment as well as the changing nature of HMO product. We find that revenue increases at a slower rate (by about 5 percent) in markets with relatively concentrated HMO markets power and more competitive hospital markets. Finally, increased for-profit HMO presence is associated with smaller cost and revenue growth, and the effect differs between low and high penetration markets.
Keywords: HMO penetration; hospital costs; managed care; healthcare financing
JEL Codes: I11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| HMO penetration (I11) | hospital costs and revenues (H51) |
| HMO concentration (I11) | revenue growth (O49) |
| for-profit share (D33) | hospital costs and revenues (H51) |
| HMO penetration interacts with backlash period indicator (C41) | hospital costs and revenues (H51) |