THE IMPACT OF NON-IPA HMOS ON THE NUMBER OF HOSPITALS AND HOSPITAL CAPACITY

Concentration in the hospital market could limit the success of health care reform strategies that rely on managed care to constrain costs. Hospital market capacity also is important because capacity affects bo th costs and the degree of price competition. Because managed care pla ns, particularly non-individual practice association (non-IPA) model H MOs, practice a less hospital-intensive style of care, consolidation a nd downsizing in the hospital market potentially Mill accompany manage d care growth, influencing the long-run effectiveness of managed care cost-containment strategies. Using Standard Metropolitan Statistical A rea (SMSA) data from 1982 and 1987, a 10-percentage point increase in non-IPA HMO market shave is estimated to reduce the number of hospital s by about 4%, causing an approximate 5% reduction in the number of ho spital beds. No statistically significant relationship is found betwee n non-IPA HMO penetration rates and hospital occupancy rates.