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Hospital cost and quality performance in relation to market forces: an examination of U.S. community hospitals in the “post-managed care era”

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  • H. Jiang
  • Bernard Friedman
  • Shenyi Jiang

Abstract

Managed care substantially transformed the U.S. healthcare sector in the last two decades of the twentieth century, injecting price competition among hospitals for the first time in history. However, total HMO enrollment has declined since 2000. This study addresses whether managed care and hospital competition continued to show positive effects on hospital cost and quality performance in the “post-managed care era.” Using data for 1,521 urban hospitals drawn from the Healthcare Cost and Utilization Project, we examined hospital cost per stay and mortality rate in relation to HMO penetration and hospital competition between 2001 and 2005, controlling for patient, hospital, and other market characteristics. Regression analyses were employed to examine both cross-sectional and longitudinal variation in hospital performance. We found that in markets with high HMO penetration, increase in hospital competition over time was associated with decrease in mortality but no change in cost. In markets without high HMO penetration, increase in hospital competition was associated with increase in cost but no change in mortality. Overall, hospitals in high HMO penetration markets consistently showed lower average costs, and hospitals in markets with high hospital competition consistently showed lower mortality rates. Hospitals in markets with high HMO penetration also showed lower mortality rates in 2005 with no such difference found in 2001. Our findings suggest that while managed care may have lost its strength in slowing hospital cost growth, differences in average hospital cost associated with different levels of HMO penetration across markets still persist. Furthermore, these health plans appear to put quality of care on a higher priority than before. Copyright Springer Science+Business Media New York (outside the USA) 2013

Suggested Citation

  • H. Jiang & Bernard Friedman & Shenyi Jiang, 2013. "Hospital cost and quality performance in relation to market forces: an examination of U.S. community hospitals in the “post-managed care era”," International Journal of Health Economics and Management, Springer, vol. 13(1), pages 53-71, March.
  • Handle: RePEc:kap:ijhcfe:v:13:y:2013:i:1:p:53-71
    DOI: 10.1007/s10754-013-9122-9
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    References listed on IDEAS

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    Cited by:

    1. Kurt A. Wurthmann, 2014. "Service on a Stigmatized Board, Social Capital, and Change in Number of Directorships," Journal of Management Studies, Wiley Blackwell, vol. 51(5), pages 814-841, July.

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    More about this item

    Keywords

    Managed care; Hospital cost; Mortality rates; Hospital competition; I11;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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