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Causes of cost inefficiency in HMOs

Causes of cost inefficiency in HMOs Estimates a total effects cost function using a national 1994 health maintenance organization (HMO) data set to examine and update findings related to HMO efficiency. The cost function controls for ownership characteristics (profit status and ownership), size, enrollment diversity, regional location, product diversity, model type, payment characteristics, and years of operation. While not explicitly controlling for quality or acuity, measures of plan and enrollee diversity help control for acuity and quality. Results show that most of the difference in cost efficiency between HMOs is explained by factors specific to the HMO, including efficiencies of scale and scope, lower levels of Medicare patients, and efficient levels of capital. The study also shows that for‐profits are more efficient than non‐profits because they rely less on withhold pools to control costs. Limitations of the study include weak controls for quality of care, and limited data related to payment characteristics. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Health Care Quality Assurance Emerald Publishing

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References (31)

Publisher
Emerald Publishing
Copyright
Copyright © 2000 MCB UP Ltd. All rights reserved.
ISSN
0952-6862
DOI
10.1108/09526860010336984
Publisher site
See Article on Publisher Site

Abstract

Estimates a total effects cost function using a national 1994 health maintenance organization (HMO) data set to examine and update findings related to HMO efficiency. The cost function controls for ownership characteristics (profit status and ownership), size, enrollment diversity, regional location, product diversity, model type, payment characteristics, and years of operation. While not explicitly controlling for quality or acuity, measures of plan and enrollee diversity help control for acuity and quality. Results show that most of the difference in cost efficiency between HMOs is explained by factors specific to the HMO, including efficiencies of scale and scope, lower levels of Medicare patients, and efficient levels of capital. The study also shows that for‐profits are more efficient than non‐profits because they rely less on withhold pools to control costs. Limitations of the study include weak controls for quality of care, and limited data related to payment characteristics.

Journal

International Journal of Health Care Quality AssuranceEmerald Publishing

Published: Jul 1, 2000

Keywords: Efficiency; Costs; Models; Health; Organizations

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