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A Comparison of HMO Efficiencies as a Function of Provider Autonomy

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  • Patrick L. Brockett
  • Ray E. Chang
  • John J. Rousseau
  • John H. Semple
  • Chuanhou Yang
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    Abstract

    Current debates in the insurance and public policy literatures over health care financing and cost control measures continue to focus on managed care and HMOs. The lower utilization rates found in HMOs (compared to traditional fee-for-service indemnity plans) have generally been attributed to the organization's incentive to eliminate all unnecessary medical services. As a consequence HMOs are often considered to be a more efficient arrangement for delivering health care. However, it is important to make a distinction between utilization and efficiency (the ratio of outcomes to resources). Few studies have investigated the effect that HMO arrangements would have on the actual efficiency of health care delivery. Because greater control over provider autonomy appears to be a recurrent theme in the literature on reform, it is important to investigate the effects these restrictions have already had within the HMO market. In this article, the efficiencies of two major classes of HMO arrangements are compared using "game-theoretic" data envelopment analysis (DEA) models. While other studies confirm that absolute costs to insurance firms and sponsoring companies are lowered using HMOs, our empirical findings suggest that, within this framework, efficiency generally becomes worse when provider autonomy is restricted. This should give new fuel to the insurance companies providing fee-for-service (FFS) indemnification plans in their marketplace contentions. Copyright The Journal of Risk and Insurance.

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    Bibliographic Info

    Article provided by The American Risk and Insurance Association in its journal The Journal of Risk and Insurance.

    Volume (Year): 71 (2004)
    Issue (Month): 1 ()
    Pages: 1-19

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    Handle: RePEc:bla:jrinsu:v:71:y:2004:i:1:p:1-19

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    1. repec:ise:isegwp:wp182007 is not listed on IDEAS
    2. Kankana Mukherjee & Rexford Santerre & Ning Jackie Zhang, 2010. "Explaining the efficiency of local health departments in the U.S.: an exploratory analysis," Health Care Management Science, Springer, vol. 13(4), pages 378-387, December.
    3. Bikash Ranjan Debata & Bhaswati Patnaik & S.S. Mahapatra & S. Sreekumar, 2013. "Efficiency measurement amongst medical tourism service providers in India," International Journal for Responsible Tourism, Fundatia Amfiteatru, vol. 1(1), pages 24-31, January.
    4. Yi-Chung Hsu, 2014. "Efficiency in government health spending: a super slacks-based model," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(1), pages 111-126, January.

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