Does Competition from HMOs Affect Fee-For-Service Physicians?

This paper develops county-level estimates of HMO market share for all counties in the United States and uses them to examine the relationship between HMO market share and the fee for a normal office visit with an established patient charged by 2,845 fee-for-service (FFS) physicians. Two-stage least squares estimates indicate that increases of 10 percentage points in HMO market share are associated with decreases of approximately 11 percent in the normal office visit fee. However, further examination indicates that the incomes of the physicians in the sample are not lower in areas with higher HMO market share. In addition, the quantity of services provided, measured by the number of hours worked and the number of patients seen per week, is not higher in these areas. While it is possible that physicians induce demand to change the volume or mix of services provided to patients in ways that do not affect the number of hours worked or patients seen, another hypothesis consistent with these findings is that FFS physicians respond to competition from HMOs by adopting multi-part pricing strategies in which the price for an office visit is reduced but prices for other services are raised.

Managed Care and Technology Adoption in Health Care: Evidence from Magnetic Resonance Imaging

Increasing managed care activity could influence the adoption and diffusion of new medical technologies. This paper empirically examines the relationship between HMO market share and the diffusion of magnetic resonance imaging (MRI) equipment. Across markets, increases in HMO market share are associated with slower diffusion of MRI into hospitals between 1983 and 1993, and with substantially lower overall MRI availability in and outside of hospitals in the mid and later 1990s. High managed care areas also had markedly lower rates of MRI procedure use. These results suggest that technology adoption in health care can respond to changes in financial and other incentives associated with managed care, which may have implications for health care costs and patient welfare.

The Relation Between Managed Care Market Share and the Treatment of Elderly Fee-For-Service Patients with Myocardial Infarction

Managed care may affect medical treatments for non-managed-care patients if it alters local market structure or physician behavior. We investigate whether higher levels of overall managed care market share are associated with greater use of recommended therapies for fee-for-service patients with acute myocardial infarction using data on 112,900 fee-for-service Medicare beneficiaries residing in one of 320 metropolitan statistical areas, with age >= 65 years, and admitted with an acute myocardial infarction between February 1994 and July 1995 from the Cooperative Cardiovascular Project. After adjustment for patient characteristics, severity of illness, characteristics of the hospital of admission, specialty of treating physicians, and other area characteristics, patients treated in areas with high levels of managed care had greater relative use of beta-blockers during hospitalization and at discharge and aspirin during hospitalization and at discharge, consistent with more appropriate care. Patients in high HMO areas may be less likely to receive angiography when compared to areas with low levels of managed care, although this result was only marginally significant. In unadjusted comparisons, patients in high HMO market share areas had lower 30 day mortality, but there were no differences in 30 day mortality when all of the control variables were included in the model. We conclude that managed care can have widespread effects on the treatment of patients and the quality of care they receive, even for patients not enrolled in managed care organizations.

The Effects of HMOs on Conventional Insurance Premiums: Theory and Evidence

We develop a model of imperfectly competitive insurers that compete with HMOs for consumers who have private information about their health status. We illustrate two conflicting effects of increasing HMO activity on conventional insurance premiums. We term these effects market discipline -- HMO competition may limit the ability of insurers to exercise market power, thus driving prices down -- and market segmentation -- HMOs may skim the healthiest patients, thus driving insurers' costs and prices up. We empirically examine the relative importance of these effects using data from a firm-level survey that provides data on premiums, together with market-level measures of HMO activity. Our results suggest that the market segmentation effect is important, and that increases in HMO activity may increase insurance premiums.

Managed Care, Technology Adoption, and Health Care: The Adoption of Neonatal Intensive Care

Managed care activity may alter the incentives associated with the acquisition and use of new medical technologies, with potentially important implications for health care costs, patient care, and outcomes. This paper discusses mechanisms by which managed care could influence the adoption of new technologies and empirically examines the relationship between HMO market share and the diffusion of neonatal intensive care, a collection of technologies for the care of high risk newborns. We find that managed care slowed the adoption of NICUs, primarily by slowing the adoption of mid-level NICUs rather than the most advanced high-level units. Slowing the adoption of mid-level units would likely have generated savings. Moreover, opposite the frequent supposition that slowing technology growth is uniformly harmful to patients, in this case reduced adoption of mid-level units could have benefitted patients, since health outcomes for seriously ill newborns are better in higher-level NICUs and reductions in the availability of mid-level units appear to increase the chance of receiving care in a high-level center.

HMOs and Fee-For-Service Health Care Expenditures: Evidence from Medicare

Increasing levels of HMO activity may influence health expenditures in other sectors of the market. Medicare provides FFS coverage to the majority of its beneficiaries and may thus provide a way of examining these so-called spillover effects. This paper examines 1986-1990 Medicare FFS expenditures at the county- and MSA- levels, coupled with county- and MSA-level measures of HMO market share. Fixed-effects and IV estimates of the relationship between market share and expenditures are presented. All of the models imply that FFS expenditures are concave in market share and that expenditures are decreasing in market share for market shares above about 18%. Many of the estimates suggest that expenditures become decreasing in market share at much lower levels (between 0% and 10%). Fixed-effects estimates imply that increases in market share from 20 to 30 percent would be associated with expenditure reductions of 3.4% -6.6% in Part A expenditures and 2.5% - 5.6% in Part B expenditures. IV estimates imply larger responses. The results are consistent with the hypothesis that managed care can affect non-managed-care expenditures.

Use of the Internet for health information by the chronically ill

Introduction: Chronic conditions are among the leading causes of death and disability in the United States. The Internet is a source of health information and advice for individuals with chronic conditions and shows promise for helping individuals manage their conditions and improve their quality of life. Methods: We assessed Internet use for health information by people who had one or more of five common chronic conditions. We conducted a national survey of adults aged 21 and older, then analyzed data from 1980 respondents who had Internet access and who reported that they had hypertension, diabetes, cancer, heart problems, and/or depression. Results: Adjusted rates for any Internet use for health information ranged from 33.8% (heart problems only) to 52.0% (diabetes only). A sizable minority of respondents — particularly individuals with diabetes — reported that the Internet helped them to manage their condition themselves, and 7.9% said information on the Internet led them to seek care from a different doctor. Conclusion: Use of the Internet for health information by chronically ill patients is moderate. Self-reported effects on choice of treatment or provider are small but noteworthy

The Effect of Managed Care on Health Care Providers

We investigate the effect of managed care on the health care system, focusing on the effects managed care could have on the number and types of health care providers and their efficiency. By influencing providers, managed care may change the structure and performance of the entire health care system in ways that influence care provided to all patients. We begin by discussing the mechanisms by which managed care influences health care providers, concentrating on shifts in market demand and increases in the amount of attention paid to price in provider choices. We develop a theoretical framework that illustrates these effects. We then empirically examine the relationship between managed care activity and mammography providers. We find evidence that increases in HMO activity are associated with changes in the number of providers, the volume of services produced by each provider, and the prices they charge. This evidence is consistent with the view that HMOs can have broad effects on health care providers.