Hospital expenditures and utilization: The impact of HMOs

Objective: To determine whether hospital utilization and expenditures have declined more rapidly in metropolitan statistical areas (MSAs) with high he alth maintenance organization (HMO) penetration compared with MSAs with low HMO penetration. Study Design: Levels and rates of change in hospital expenditures and hospi tal utilization in MSAs with varying levels of HMO penetration rates in 199 6. Levels and rates of change in hospital admission rates, hospital inpatie nt days, emergency room visits, total expenditures per capita, and expendit ures per adjusted inpatient day from 1982 to 1996 were compared. A first-di fference multivariate model was evaluated for 1993 to 1996. Results: At the MSA level, the rates of change in hospital utilization and hospital expenditures varied only modestly with the level of HMO penetratio n. Changes in hospital admission rates did not vary systematically with HMO penetration rates except in the 1993 to 1996 period, when MSAs with the hi ghest HMO penetration had the largest decline. Reductions in hospital days per capita and expenditures per day did not vary systematically by level of HMO penetration. Emergency room days declined most rapidly in the MSAs wit h the highest HMO penetration in the 1982 to 1993 period and were similar i n the 1993 to 1996 period. Hospital expenditures per capita showed the grea test association with managed care penetration. They averaged 1.6% slower a nnual growth in MSAs with high versus low HMO penetration in the 1982 to 19 96 period. Conclusion: This national study using data from 1982 to 1996 suggests that the effects of HMO penetration on hospital expenditures and hospital utiliz ation at the MSA level are small (generally less than 1% per year).