The Effects of HMO Ownership on Hospital Costs and Revenues: Is there a Difference between For-Profit and Nonprofit Plans?

Abstract

We conducted multivariate analyses to examine whether high health maintenance organization (HMO) penetration and large share of for-profit health plans in a market reduced hospital cost and revenue growth rates between 1989 and 1998. We found that hospitals in high HMO areas experienced revenue and cost growth rates that were 21 and 18 percentage points, respectively, below hospitals in low HMO areas. We also found that, conditional on overall HMO penetration level, hospitals in areas with high for-profit HMO penetration experienced revenue and cost growth rates that were 10 percentage points below hospitals in areas with low for-profit penetration areas; the difference was especially evident within high HMO penetration areas.