Setting health maintenance organization capitation rates for Medicaid in Wisconsin.

In late fall 1984, more than 110,000 Wisconsin Aid to Families with Dependent Children (AFDC) Medicaid recipients were enrolled in health maintenance organizations (HMO's). Capitation rates were set by competitive bidding, subject to a rate ceiling. Planners considered whether to adjust the rates to account for demographic changes in the AFDC population between the time that data for the rate ceilings were collected and when the rates went into effect. They also considered whether to pay a single rate or to adjust rates for the age and sex of each HMO's actual enrollees. This article is a report of the analysis that led to a decision to pay a single, countywide rate that was not demographically adjusted.     

Inferring capitation rates from aggregate health plans' costs.

Setting risk-adjusted capitation rates in health systems with centralized financing and decentralized delivery is one of the most intriguing policy issues. The common practice to set capitation group rates is based on individual data collected from either population surveys or medical records, using a single-and in most cases arbitrary-set of relative unit costs of services. This paper presents a method for estimating group-specific mean costs and capitation rates using a panel of aggregate cost data of the competing health plans and the composition of their populations. This method is used to estimate mean costs and capitation rates for the Israeli health care system. The limited data available severely constrains the range of estimable models, however, the results evoke some questions with regards to reimbursement and rates presently used, as well as to the methodology used to estimate them.     

Adjusting capitation rates using objective health measures and prior utilization.

Several analysts have proposed adding adjusters based on health status and prior utilization to the adjusted average per capita cost formula. The authors estimate how well such adjusters predict annual medical expenditures among non-elderly adults. Both measures substantially improve on the variables currently used. If only health measures are added, 20-30 percent of the predictable variance is explained; if only prior use is added, more than 40 percent is explained; if both are added, about 60 percent is explained. The results support including some measure of use in the formula until better health measures are developed.     

Mammography in a health maintenance organization.

The charts of a random sample of 496 women, aged 51 and older, in a staff model health maintenance organization (HMO) were retrospectively audited for mammography frequency over an 8-year period. Of the 496 women, 306 (61.7%) had at least one mammogram. For the 422 women who had been members of the HMO for at least 2 years, 196 (46.4%) had mammography within the previous 18 months.     

The impact of membership in a health maintenance organization on hospital admission rates for acute chest pain.

OBJECTIVE. We evaluate the impact of membership in a staff-model health maintenance organization (HMO) on hospital admission rates for patients presenting to an emergency department with acute chest pain. DATA SOURCES AND STUDY SETTING. Primary prospective data were gathered from all 3,006 patients presenting with a chief complaint of chest pain to the emergency department (ED) of a university teaching hospital from October 1987 to November 1989. STUDY DESIGN. Prospective cohort analysis used clinical data to stratify patients into groups at high (> or = 25%), medium (8-24%), and low risk (< or = 7%) of acute myocardial infarction (AMI). Insurance status was determined as either HMO, Medicare, commercial, Medicaid, or self-pay. Triage decisions were recorded, and patient outcomes of AMI and other final diagnoses were determined for all patients. DATA COLLECTION METHODS. Clinical data were recorded by the physicians in the ED as part of a detailed protocol. Insurance data were recorded separately by the ED staff as part of the hospital administrative database. Patient outcomes were recorded daily by research nurses for hospitalized patients; for patients who were discharged from the ED, telephone or physician follow-up was accomplished within seven days after discharge. PRINCIPAL FINDINGS. HMO patients were more likely to be admitted to the hospital than patients in other insurance groups in both the medium- and low-risk patient categories. Within the low-risk category, after controlling for clinical differences in a multiple logistic model, HMO membership retained an independent positive association with hospital admission compared to all other insurance groups except Medicaid. CONCLUSIONS. For patients with acute chest pain who were at medium and low risk of acute myocardial infarction, HMO membership was associated with higher rates of hospital admission. These findings suggest that organizational factors beyond financial incentives may exercise an important influence on hospitalization rates for HMO patients.     

Longitudinal study of health maintenance organization efficiency.

Longitudinal studies looking at health maintenance organization (HMO) efficiency in the United States have not been performed before this study--previously there have only been small inter-group studies comparing efficiencies. The objectives here were twofold: to analyse HMO efficiency longitudinally, using a data envelopment analysis (DEA) model; and to compare the various types of HMOs and their efficiency using DEA. A cohort of HMOs was followed longitudinally and a number of variables measuring efficiency were studied. Data were derived from the HMO database survey (HCIA Inc.) for 1993-1997. Thirty-six HMOs were followed over a five-year period, and baseline input and output variables were collected. These measures are proxies for efficiency using the DEA methodology. Over all, using the DEA model it was demonstrated that HMOs tended to improve efficiency over time. Independent Practice Association HMOs appeared to show the highest level of improved efficiency. HMO type, profit status, federal eligibility and age were predictive variables for efficiency. Results of this study demonstrate that HMOs are improving efficiency longitudinally, and in general, certain specific models are longitudinally more efficient than others. Moreover, attributes of efficient HMOs have been identified. For policy-makers looking at efficiency, this information can be used to determine which HMO models are more appropriate when trying to achieve cost containment and effectiveness.     

Pricing health care services: applications to the health maintenance organization.

This article illustrates how management in one type of service industry, the health maintenance organization (HMO), have attempted to formalize pricing. This effort is complicated by both the intangibility of the service delivered and the relatively greater influence in service industries of non-cost price factors such as accessibility, psychology, and delays. The presentation describes a simple computerized approach that allows the marketing manager to formally estimate the effect of incremental changes in rates on the firm's projected patterns of enrollment growth and net revenues. The changes in turn reflect underlying variations in the mix of pricing influences including psychological and other factors. Enrollment projections are crucial to the firm's financial planning and staffing. In the past, most HMO enrollment and revenue projections of this kind were notoriously unreliable. The approach described here makes it possible for HMOs to fine-tune their pricing policies. It also provides a formal and easily understood mechanism by which management can evaluate and reach consensus on alternative scenarios for enrollment growth, staff recruitment and capacity expansion.     

Setting capitation payments in markets for health services.

Health maintenance organizations (HMO's) are paid a capitated amount for enrolled Medicare beneficiaries that is 95 percent of what these enrollees would be expected to cost in the fee-for-service sector. However, it appears that HMO enrollees are less costly than other Medicare beneficiaries. With a simulation model, we demonstrate that with a 95-percent pricing rule, any significant degree of biased selection leads to increased cost to the payer, even when HMO's are cost effective compared with the fee-for-service sector. Optimal pricing percentages from the point of view of cost minimization are considerably less than 95 percent.     

Modeling risk-adjusted capitation rates for Umbria,Italy

We studied the potential effect of refining per capita financing in Italy by risk adjustment using severity of illness as well as age and gender. Data were drawn from hospital, pharmaceutical, and demographic files for the entire population of the Umbrian region of Italy in 1997 and 1998. Hospitalization data from 1997 were used to classify patients into severity of illness categories which were hypothesized to be at risk for higher health services costs in 1998. Data on costs in 1998 were developed from hospital and pharmaceutical administrative data. Coefficients from 1997 models were used to develop predicted 1998 costs. Predicted costs in 1998 were compared to observed costs. Disease Staging models identified 155 unique clinical risk adjustment categories. These categories included 5.3% of the Umbrian population in 1997, who accounted for 21.6% of costs in the next year. In prediction models of future year costs using Umbrian data, R² values for Disease Staging models were 0.16, compared to values of 0.07 for a risk adjustment model used by Medicare. By identifying groups within the overall population who were more severely ill and who used more resources, these models can be used to assist health care planners estimate health care resources such as facilities, manpower, and programs.     

Diagnostic accuracy of asthma within a health maintenance organization.

Reported asthma morbidity and mortality are increasing in the U.S. We addressed one explanation, that the accuracy of the diagnosis of asthma is changing. The diagnosis of asthma was evaluated in 320 inpatient and outpatient records bearing the diagnosis of asthma for the periods 1970-73 and 1980-83 in a health maintenance organization (HMO). We determined whether or not our agreement with the chart diagnosis was a function of: sex, period of treatment, inpatient vs outpatient setting, whether or not asthma was the primary or secondary diagnosis, and patient age. The standard of comparison was an expert panel review in which asthma was divided into six categories. In both inpatient (97%) and outpatient settings (94%), the majority of charts examined exhibited a clinical picture consistent with asthma. The rate of the narrowly defined "definite asthma" category varied with respect to age, with the highest proportion in the under 20-year age group (74%) and the lowest (46%) in the over 60 age groups, probably because older individuals often have coexisting smoking related diseases. The increase in "definite asthma" among outpatients from the 1970s to the 1980s likely reflects increasing chart documentation among physicians, illustrating the need for clear, consistent chart documentation of signs and symptoms of asthma.     

Regionalization of services within a multihospital health maintenance organization.

Among the many factors that may explain lower costs for enrollees in Health Maintenance Organizations (HMOs) is the possibility that the HMO provides inpatient services more efficiently. While direct cost comparisons are in appropriate, it is reasonable to examine whether the Kaiser program in the San Francisco Bay Area regionalizes services among its ten hospitals. The presence of each of 43 facilities/services reported is examined in a regression model that includes type of hospital, size, a size-type interaction, and the distance to the nearest competing facility. When the generally smaller size of the Kaiser hospitals was controlled for, Kaiser hospitals had fewer technologically based services and concentrated these services in larger hospitals. Kaiser had more outpatient-oriented services. Among non-Kaiser hospitals, some specialized facilities were competitively distributed.     

Cost of care for cancer in a health maintenance organization

The direct costs of medical care for cancer are examined at Kaiser Permanente (KP) in Northern California. Use data from July 1987 through June 1991 were obtained from KP automated files for all 21,977 KP patients in the Bay Area SEER registry with cancer at one of seven cancer sites. Medical charts were reviewed for a stratified sample of 886 patients. Costs were estimated for initial, continuing, and terminal care, and for all person time within 15 years of diagnosis, by stage at diagnosis. From diagnosis until death or 15 years, long-term costs attributable to cancer were as follows: breast, $35,000; colon, $42,000; rectum, $51,000; lung, $33,000; ovarian, $64,000; prostate, $29,000; and Non-Hodgkin's Lymphoma (NHL), $48,000. The utilization and cost results reported here may be useful in assessing the cost-effectiveness of cancer prevention and control programs, in adjusting capitation rates and budgets, and in estimating the aggregate medical care costs attributable to cancer.     

Evaluation of smoking prohibition policy in a health maintenance organization.

Four months after Group Health Cooperative of Puget Sound adopted a policy prohibiting smoking in its 35 facilities, we assessed attitudes and behavior of a sample of 447 employees. Results indicated that 85 per cent of employees approved of the decision to go smoke-free, the rate of reported smoking decreased, and a large proportion of non-smokers believed that their own and co-workers' work performance had improved. Suggestions for successful implementation of future programs are provided.     

The health maintenance organization strategy: a corporate takeover of health services delivery.

This paper presents a political economic framework for viewing the social organization of the delivery of health care servies and predicting a qualitatively different institutional configuration involving the health maintenance organization. The principal forces impacting American capitalism today are leading to a fundamental restructuring for increased social efficiency of the entire social welfare sector, including the health services industry. The method to achieve this restructuring involves health policy directed at raising the contribution to the social surplus from the delivery of health care services and eventual corporate domination. The health maintenance organization conceptualization is examined with suggestions as to how the HMO strategy promoted by the state leads to this corporate takeover. The mechanism and extent of the present corporate involvement are examined and implications of health services as a social control mechanism are presented.     

Effect of mergers on health maintenance organization premiums

This study estimated the effect of mergers on health maintenance organization (HMO) premiums, using data on all operational non-Medicaid HMOs in the United States from 1985 to 1993. Two critical issues were examined: whether HMO mergers increase or decrease premiums; and whether the effects of mergers differ according to the degree of competition among HMOs in local markets. The only significant merger effect was found in the most competitive markets, where premiums increased, but only for 1 year after the merger. Our research does not support the argument that consolidation of HMOs in local markets will benefit consumers through lower premiums.