Hospital Contracting Under Managed Care

The Foundation's Changes in Health Care Financing and Organization program was designed to support research, demonstration, and evaluation projects examining major changes in health care financing.This project will examine the determinants of managed care contracts with hospitals and the dynamics of those contracts over time. In particular, the researchers will examine the: (1) effects of insurance market competition on the hospital contracting behavior of HMOs and PPOs; (2) relative importance of hospital costs, quality, services and other factors in the choice of contracts; (3) stability of HMO/PPO contracts with hospitals over time; and (4) effects of HMO/PPO strategies on managed care market penetration over time. The objective of this study is to help policy makers understand why MCOs contract with specific hospitals. This study will use 1987-1994 patient discharge data from Illinois and New Jersey. These state databases are among the few that contain information on the HMO or PPO paying for the hospitalization. The researchers will add details of these specific MCOs (such as enrollment and model type) from secondary sources such as the GHAA Annual Directory. These state databases will be linked to AHA annual survey data to obtain hospital financial performance, casemix and services data, and the Area Resource File to include area sociodemograpic characteristics and supply of health services data. The researchers will use regression models to examine which hospitals get and keep MCO contracts and which of these hospitals' patients are actually admitted to the hospitals (since a MCO could favor one contracted hospital over another). Finally, they will then perform a market share analysis which hypothesizes that insurers (MCOs) who successfully contract with hospitals will expand their market share.

Grant Details

Amount Awarded $421,487.00

Awarded on: 4/29/1996

Time frame: 6/1/1996 - 12/31/1998

Grant Number: 29388


University of Alabama at Birmingham

Administration Building, Suite 1070
1530 Third Avenue South
Birmingham, 35294-0110


Michael A. Morrisey
Project Director