The Changing Effect of HMO Market Structure: An Analysis of Penetration, Concentration, and Ownership Between 1994-2005
NBER Working Paper No. 13775
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.
Published: 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.