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Price competition induced by HMOs and other managed care plans in California has not diminished hospital quality of care

In California, managed care is prevalent and managed care markets are mature. In that State, a new study found that hospitals that face high price competition, which are believed to have cut costs in response, have not lowered their quality of care. On the contrary, the study found evidence that they provide higher quality care.

The researchers linked hospital discharge data from general hospitals in California with vital statistics data from 1994 to 1999. The study sample included adult patients hospitalized for heart attack, hip fracture, stroke, gastrointestinal hemorrhage (GIH), congestive heart failure (CHF), or diabetes.

Thirty-day mortality rates ranged from a high of 16 percent for stroke to a low of 3.3 percent for diabetes. Higher hospital competition was associated with lower 30-day mortality for three to five of the six study conditions, depending on the competition measure. Higher HMO penetration was associated with lower mortality for GIH and CHF. Higher hospital competition reduced mortality for hip fracture by 26 percent, for stroke by 33 percent, and GIH by 18 percent. Higher HMO penetration reduced mortality for GIH by 25 percent and for CHF by 23 percent.

These odds ratios are consistent with clinically significant effects of hospital competition on mortality. For example, a California hospital at the 10th percentile of the Herfindahl competition index (area of low hospital competition) had a 30-day mortality rate of 7.1 percent for hip fracture compared with 6.2 percent in a hospital at the 90th percentile for the index (area of high hospital competition). The corresponding figures for other conditions were 18.4 vs. 15.6 percent for stroke and 6.2 vs. 5.6 percent for GIH. The study was supported by the Agency for Healthcare Research and Quality (HS10770).

More details are in "Hospital competition, managed care, and mortality after hospitalization for medical conditions in California," by Jeannette Rogowski, Ph.D., Arvind K. Jain, M.S., and Jose J. Escarce, M.D., Ph.D., in the April 2007 HSR: Health Services Research 42(2), pp. 682-705.

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