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Is Managed Care Still an Effective Cost Containment Device?

Listed author(s):
  • Shen Yu-Chu

    ()

    (Naval Postgraduate School and NBER)

  • Melnick Glenn

    ()

    (University of Southern California)

Registered author(s):

    In this paper we take a historical perspective to examine the effects of managed care and hospital competition on hospital cost and revenue growth during managed cares boom period (1990-1994), mature period (1995-1999), and backlash period (2000-2003). We find that while higher managed care presence, in particular, HMOs, was effective in slowing down hospital cost and revenue growth during the boom and the mature periods, its cost containment effect diminished during the backlash period. This result is stable under different specifications and sensitivity analyses. Hospital competition effects, however, remain strong throughout the three periods. It appears that hospital competition effects were initially the result of aggressive selective contracting in the high managed care markets, but were later fueled by the less saturated, but growing managed care markets that seemed to catch up with the more developed markets.

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    File URL: https://www.degruyter.com/view/j/fhep.2006.9.1/fhep.2006.9.1.1007/fhep.2006.9.1.1007.xml?format=INT
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    Article provided by De Gruyter in its journal Forum for Health Economics & Policy.

    Volume (Year): 9 (2006)
    Issue (Month): 1 (December)
    Pages: 1-24

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    Handle: RePEc:bpj:fhecpo:v:9:y:2006:i:1:n:3
    Contact details of provider: Web page: https://www.degruyter.com

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    1. repec:mpr:mprres:3164 is not listed on IDEAS
    2. Town, Robert & Vistnes, Gregory, 2001. "Hospital competition in HMO networks," Journal of Health Economics, Elsevier, vol. 20(5), pages 733-753, September.
    3. Anil Bamezai & Jack Zwanziger & Glenn A. Melnick & Joyce M. Mann, 1999. "Price competition and hospital cost growth in the United States (1989-1994)," Health Economics, John Wiley & Sons, Ltd., vol. 8(3), pages 233-243.
    4. Melnick, Glenn A. & Zwanziger, Jack & Bamezai, Anil & Pattison, Robert, 1992. "The effects of market structure and bargaining position on hospital prices," Journal of Health Economics, Elsevier, vol. 11(3), pages 217-233, October.
    5. Shen, Yu-Chu, 2003. "The effect of financial pressure on the quality of care in hospitals," Journal of Health Economics, Elsevier, vol. 22(2), pages 243-269, March.
    6. David M. Cutler & Mark McClellan & Joseph P. Newhouse, 2000. "How Does Managed Care Do It?," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 526-548, Autumn.
    7. McClellan, Mark & Cutler, David & Newhous, Joseph P., 2000. "How Does Managed Care Do It?," Scholarly Articles 2643884, Harvard University Department of Economics.
    8. repec:mpr:mprres:3515 is not listed on IDEAS
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