Competitive behavior in the HMO marketplace

Health Affairs

Volumn 21, Issue 1, 2002, Pages 194-202

  Pauly, Mark V ^a   Hillman, Alan L ^b   Kim, Myoung S ^c   Brown, Darryl R ^b  

^a UNIVERSITY OF PENNSYLVANIA   (United States)

^b UNIVERSITY OF PENNSYLVANIA   (United States)

^c MATHEMATICA POLICY RESEARCH   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ARTICLE; COMPARATIVE STUDY; ECONOMIC ASPECT; ECONOMICS; EVALUATION; HEALTH CARE COST; HEALTH MAINTENANCE ORGANIZATION; HEALTH SERVICES RESEARCH; INCOME; NON PROFIT ORGANIZATION; ORGANIZATION AND MANAGEMENT; STATISTICS; UNITED STATES;

ECONOMIC COMPETITION; EFFICIENCY, ORGANIZATIONAL; HEALTH CARE SECTOR; HEALTH MAINTENANCE ORGANIZATIONS; HEALTH SERVICES RESEARCH; INCOME; ORGANIZATIONS, NONPROFIT; UNITED STATES;

EID: 0036371740     PISSN: 02782715     EISSN: None     Source Type: Journal    
DOI: 10.1377/hlthaff.21.1.194     Document Type: Article

References (9)

1. R.H. Miller, "Health System Integration: A Means to an End," Health Affairs (Summer 1996): 92-106; and R. Feldman et al., "Effect of Mergers on Health Maintenance Organization Premiums," Health Care Financing Review 17, no. 3 (1996): 171-189.
2. R.H. Miller, "Health System Integration: A Means to an End," Health Affairs (Summer 1996): 92-106; and R. Feldman et al., "Effect of Mergers on Health Maintenance Organization Premiums," Health Care Financing Review 17, no. 3 (1996): 171-189.
3. It is possible that managed care could lower total premiums and yet increase insurers' profits.
4. D.R. Wholey et al., "The Effect of Market Structure on HMO Premiums," Journal of Health Economics 14, no. 1 (1995): 81-105.
5. Mueller did apply his method to pharmaceutical firms and found noncompctitive levels of profit persistence there. Mueller, Profits in the Long Run.
6. D.R. Wholey et al., "Scale and Scope Economies among HMOs," Journal of Health Economics 15, no. 6 (1996): 657-684.
7. As noted previously, we did find that the change in profits is inversely related to the 1994 level of profits, a finding confirmed in logit regressions. Although there was no statistically significant relationship between the 1994 level or change in profit rates and changes in either of the two measures of competition in multiple regressions that control for other factors, it does turn out that the changes in the average number and the average Herfindahl Index of HMOs were larger for cities in the most profitable 1994 quintile than in the least profitable quintile. The number of HMOs increased 88 percent in the most profitable quintile of markets versus an increase of 37 percent in the least profitable; the Herfindahl Index (of monopoly) fell by 36 percent in the most profitable area versus 24 percent in the least profitable area. The absolute changes displayed similar patterns. These differences in means do, however, hide substantial inconsistency in the pattern on a city-by-city level.
8. Wholey, "Scale and Scope Economics."
9. We suspect that part of the problem in specifying correct models of HMO return on investment is wide variation across plans, both within and between ownership categories, in how they measure capital or assets. Our own screening of the InterStudy data suggested substantial and implausible variation in measures of assets.