Woodward RS, Schnitzler MA.

AHSR FHSR Annu Meet Abstr Book. 1996; 13: 13a.

Health Administration Program, Washington University, St. Louis, MO 63110, USA.

RESEARCH OBJECTIVES: While the market for health care services is being transformed by the growth of managed care philosophies, the magnitude of this growth is typically measured indirectly by market shares of payers, such as HMOs, that have recognized managed care labels. This manuscript reports an alternative micro-level measurement of one fundamental characteristic of managed care, the care-related financial risks born by providers. This risk-metric is then applied to insurance-plan-level experiences in one hospital to examine the extent to which risk levels correlate with managed care labels. STUDY POPULATION: We analyzed all 65,007 discharges from a large and prestigious teaching hospital in the Midwest in 1993 and 1994 with completed HBO (HBO, Inc., Atlanta) financial abstracts. Patient level data included HBO-estimated cost and actual payment, LOS, DRG, and principal procedure. From these, we identified the average rate of return and risk levels for the 38 payers with 20 or more discharges each year. STUDY DESIGN: The manuscript measures risk and return characteristics of contracts between hospitals (or systems) and payers with the measures of variation and profits often applied to financial instruments. A plan's return is the difference between actual payments and provider total costs (expressed as a percent of actual payments) averaged over all discharges insured by the plan. A plan's risk is the uncertainty of the return and is measured by the Standard Error of the plan's return. PRINCIPAL FINDINGS: We found no significant correlation between the labels HMO and/or PPO and the risk and return characteristics of plans, either in magnitude or first difference format. This lack of significatnce was maintained after controlling for plan size, year, and various patient characteristics. In the experience of this hospital, Medicare and Medicaid patients (capitated or not) have significantly more risk than private plans of any label. CONCLUSIONS: Whereas greater risk-bearing is typically associated with higher returns in financial contracts and insurance, this hospital does not appear to have been able to generate higher returns by assuming greater financial risks. Furthermore, the levels of financial risk assumed by this hospital appear to be uncorrelated with the labels HMO and/or PPO, the standard indicators of managed care. POLICY RELEVANCE: If providers are increasingly assuming the care-related financial risks traditionally borne by insurance companies, a readily calculable risk measure should be an important component of the insurance plan negotiations. This manuscript identifies such a measure and demonstrates that in one sizable hospital, this measure is poorly correlated with the usual measures of managed care. More general confirmation of this result would open an important policy issue: are providers assuming significant risks outside of traditional managed care contracts, do traditional managed care contracts not assign measurably greater risk-assumption to providers, or both?

Publication Types:

• Meeting Abstracts

Keywords:

• Contracts
• Health Maintenance Organizations
• Humans
• Managed Care Programs
• Medicaid
• Negotiating
• Preferred Provider Organizations
• Research Design
• economics
• hsrmtgs

Other ID:

• HTX/97604540

UI: 102222441

From Meeting Abstracts