The Changing Effect of HMO Market Structure: An Analysis of Penetration, Concentration, and Ownership Between 1994-2005
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.
HC published as Shen, Y., Wu, V., and Melnick, G. 2010. Trends in Hospital Cost and Revenue, 1994-2005: How Are They Related to HMO Penetration, Concentration and For-Profit Ownership. Health Services Research, 45 (1): 42-61. Number 13775