Patient Safety and Quality

Studies highlight the interaction between managed care and market forces and their impact on quality of care

The Agency for Healthcare Research and Quality (AHRQ) supports several centers of excellence that conduct research on how market forces affect health care quality, access, and costs. These centers have examined a broad spectrum of markets in health care, including pharmaceutical, physician, hospital, and rural markets. A special December 2006 issue of Medical Care Research and Review 63(6 Suppl.), edited by Laurence Baker, Ph.D., of Stanford University, focuses on research into the interaction between managed care and market forces. The research was done by the University of California, San Francisco-Michigan Center of Excellence, and the RAND-University of California, Los Angeles Center of Excellence, supported in part by AHRQ (HS 10770, HS01771, and HS10856). Following are brief summaries of the introduction and five articles that appear in the issue.

Encinosa, W. and Hagan, M. "Introduction: AHRQ research on health care markets," pp. 3-8.

The introduction emphasizes the importance of research on how market forces affect health care quality, access, and costs, summarizing the five articles in the journal issue. Overall, the articles show that hospital competition improved care quality both for hospitals and for health plans. However, health plan competition did not seem to improve health plan quality. Managed care penetration did improve quality for health plans and hospitals, except for hospitals in States such as New York, where hospital rates were regulated before 1997. Neither hospital competition nor HMO penetration seemed to affect safety net hospitals that serve the poor.

Liang, S-Y., Phillips, K.A., and Haas, J.S. "Measuring managed care and its environment using national surveys: A review and assessment," pp. 9-36.

This article discusses the issues involved in defining managed care. It also explores how well 25 health plan characteristics can be used to identify managed care and its impact on health care use and access in 2 national surveys, the Medical Expenditure Panel Survey and the National Health Interview Survey. The authors note that these surveys are useful for measuring and examining managed care. However, they could be improved by adding data from the perspectives of providers, such as financial incentives or contractual relationships between individual physicians, medical groups, and health plans. The authors also suggest developing survey questions that collect information on new innovations of managed care, including multitiered networks and consumer-directed health plans.

Scanlon, D.P., Chernew, M., Swaminathan, S., and Lee, W. "Competition in health insurance markets: Limitations of current measures for policy analysis," pp. 37-55.

The authors systematically reviewed 35 studies on health plan competition. They found the three most common measures of competition are the number of health maintenance organizations (HMOs) in the market, the HMO penetration rate, and the HMO Herfindahl-Hirschman Index. They suggest that use of different measures may end in different results, especially in longitudinal studies. Moreover, certain measurement issues, such as the treatment of small firms and omitted market characteristics, could also affect the conclusions of the studies. The authors note that other competition-related measures (for example, the availability of information on price and outcomes) are important, but their impact on market outcomes has not been widely studied.

Scanlon, D.P., Swaminathan, S., Chernew, M., and Lee, W. "Market and plan characteristics related to HMO quality and improvement," pp. 56-89.

Using longitudinal data, the authors of this paper identified market and health plan characteristics associated with performance and improvement on the Health Plan Employer and Data Information Set (HEDIS) and Consumer Assessment of Health Plan Survey (CAHPS®) measures. They found that HMO competition (measured by the Herfindahl-Hirschman Index) was not associated with better performance or greater rates of improvement in performance on the HEDIS chronic care measures, but it was related to HMO performance on the CAHPS® measure (consumer satisfaction). On the other hand, HMO penetration was positively associated with HEDIS performance in several of the chronic care process and outcome measures, but not with a greater rate of improvement over time. The results suggest some caution before assuming that competition will, by itself, generate improved care quality.

Zwanziger, J. and Khan, N. "Safety-net activities and hospital contracting with managed care organizations," pp. 90-11.

This article examines what effect managed care and market forces have on safety net hospitals that serve poor and vulnerable populations. The researchers found that safety net hospitals were less likely to be members of managed care networks, which may place them at a competitive disadvantage. They used insurance contract data to identify the hospital networks of managed care plans in 71 metropolitan statistical areas. They combined these data with hospital, managed care, and market characteristic data to determine characteristics of safety net hospitals that influenced the likelihood of their contracting with managed care plans. Certain safety net hospital measures and a cluster of related hospital characteristics were associated with a lower probability of contracts.

Escarce, J.J., Jain, A.K., and Rogowski, J. "Hospital competition, managed care, and mortality after hospitalization for medical conditions: Evidence from three States," pp. 112-140.

This study assessed the effect of hospital competition and HMO penetration on mortality after hospitalization for six medical conditions (heart attack, hip fracture, stroke, gastrointestinal hemorrhage, congestive heart failure, and diabetes) in California, New York, and Wisconsin. Greater hospital competition was associated with fewer deaths in California and New York, but not Wisconsin. Higher HMO penetration was similarly associated with fewer deaths in California, but more deaths in New York. These findings suggest that hospitals in highly competitive markets compete on quality, even in the absence of mature managed care markets. The results also underscore the need to consider geographic effects in studies of market structure and hospital quality.

Return to Contents
Proceed to Next Article