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Medicare fee-for-service patients seem to fare better in areas of higher HMO market penetration

Recent State and Federal legislation on patients' rights was sparked by concerns about the quality of care provided by health maintenance organizations (HMOs). Left out of the public debate to date is the potential effect that HMOs may have on the quality of care provided to non-HMO patients, given the dominance of HMOs in many local health care markets.

A recent study supported by the Agency for Healthcare Research and Quality (HS09545) shows that higher HMO market penetration is associated with lower risk-adjusted mortality rates for fee-for-service (FFS) Medicare enrollees. This spill-over effect on quality of care received by those enrolled in FFS plans may be due to a positive effect of HMOs on local practice styles or a preferential selection by HMOs for areas with better hospital care, explains Dana Mukamel, Ph.D., of the University of Rochester School of Medicine and Dentistry.

Dr. Mukamel and colleagues analyzed 1990 data for 1,927 hospitals in 134 metropolitan areas to identify the associations between HMO market penetration, competition, and risk-adjusted mortality, controlling for other hospital characteristics and region. Among the market areas studied, HMO penetration ranged from a low of 0.2 percent to a high of 50 percent, with an average of 18 percent. Competition also varied substantially across areas. On a scale of 0 (most competitive) to 1 (least competitive), competition ranged between 0.07 and 0.80 for hospitals and between 0.09 and 1.00 for HMOs.

HMO competition had only a marginal effect on risk-adjusted mortality rates. The effect of HMO penetration was significant. Areas at the top quartile for HMO penetration (25 percent or more) had a mortality rate of 9.16 compared with 9.31 for areas at the lowest quartile (penetration of 11 percent or less). This effect was small compared with the impact of hospital region on mortality rates. However, when compared with hospital and other market factors included in this analysis, HMO penetration exhibited one of the largest associations with outcomes. This suggests that HMOs have a positive effect on the quality of care in areas in which they have substantial presence. However, the authors caution that selection of HMOs into healthier markets as well as other factors may explain this association.

Details are in "HMO penetration, competition, and risk-adjusted hospital mortality," by Dr. Mukamel, Jack Zwanziger, Ph.D., and Kenneth J. Tomaszewski, M.S., in the December 2001 Health Services Research 36(6), pp. 1019-1036.

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