HMOs Make Good Bedfellows with Mid-Cost, Higher Quality Hospitals, But Not with Teaching or For-Profit Hospitals

Hospital Contracting Under Managed Care

From 1996 to 1998, researchers at University of Alabama at Birmingham studied the behavior of managed care organizations (MCOs) in their contracting with hospitals. The study, based on eight years of data from Illinois, sought to shed light on why MCOs contract with particular hospitals and how stable these relationships are over time.

This project was part of the Robert Wood Johnson Foundation (RWJF) national program Changes in Health Care Financing and Organization (HCFO).

Key Findings

  • The findings showed that:

    • HMO contracts with hospitals remained stable over time.
    • HMOs were less likely to contract with:
      • Hospitals with higher complication rates.
      • Very low cost hospitals.
      • Very high cost hospitals.
      • Teaching, for-profit, and government-owned hospitals.

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