The impact of HMOs on hospital-based uncompensated care

Managed care in general and HMOs in particular have become the vehicle of c hoice for controlling health care spending in the private sector. By severa l accounts, managed care has achieved its cost-containment objectives. At t he same time, the percentage of Americans without health insurance coverage continues to rise. For-profit and not-for-profit hospitals have traditiona lly financed care for the uninsured from profits derived from patients with insurance. Thus the relationship between growth in managed care and HMOs, hospital "profits," and care for the uninsured represent an important polic y question. Using national data over an eight-year period, we find that a t en-percentage point increase in managed care penetration is associated with a two-percentage point reduction in hospital total profit margin and a 0.6 percentage point decrease in uncompensated care.