A new measure of the impact of managed care on healthcare markets

Background: Most studies of managed care impact have used health maintenanc e organization (HMO), penetration or index of competition as the marker of managed care impact. However, little empirical evidence has been found to s upport the validity of these or other measures in current use. In addition, as managed care evolves to forms other than HMOs and managed care penetrat ion in large metropolitan areas approaches 100% of commercially insured pat ients, the utility of the most commonly used measure, HMO penetration, will decrease still further. Objectives: To provide a preliminary analysis of the use of premiums as a m easure of market impact of managed care. Study Design: Retrospective analysis (quartile, correlation, multiple-varia ble linear regression) of publicly available datasets. Methods: Labor market-adjusted HMO premiums from 3 publicly available sourc es, for the 56 largest metropolitan areas in the United States, were compar ed with penetration and index of competition as predictors of the dependent market variable, hospital bed-days per 1000 population. Results: Health maintenance organization premiums in the Federal Employees Health Benefits Program emerged as the best predictor of HMO market impact. Average HMO premiums reported in the Interstudy database and for the Medic are+Choice program also outperformed penetration or index of competition in relating to several commonly available markers of competition such as bed- days per 1000. Conclusions: Premiums charged by HMOs are a useful measure o f the impact of managed care on healthcare markets in large metropolitan ar eas.