Utilization control in HMOs.
Health Maintenance Organizations (HMOs) have emerged as a major vehicle to reduce transaction costs associated with defining the limits of health insurance coverage and to provide appropriate provider incentives. This article explains the heterogeneous set of incentives used by HMOs to reimburse providers and performs empirical tests of their effectiveness. The empirical analyses reveal that utilization of health care services is reduced when (1) physician compensation is based on salary or capitation arrangements rather than some measure of output; (2) bonuses and paybacks are based on individual rather than group performance; and (3) when the HMO operates as a proprietary (for-profit) organization. Utilization is not significantly affected by incentives placed on the hospital. Finally, physician ownership of the HMO was found to lead to higher levels of utilization.
University of Illinois at Urbana-Champaign.
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Debrock
R J
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Arnould
D002204:Capitation Fee; D003363:Cost Control / Q000379:methods; D005069:Evaluation Studies as Topic; D006279:Health Maintenance Organizations / Q000191:economics / Q000706:statistics & numerical data*; D006761:Hospitals / Q000706:statistics & numerical data; D007087:Illinois; D007400:Interprofessional Relations; D008503:Medical Staff / Q000191:economics* / Q000458:organization & administration / Q000706:statistics & numerical data; D010816:Physician Incentive Plans / Q000191:economics* / Q000458:organization & administration / Q000706:statistics & numerical data; D010818:Practice Patterns, Physicians' / Q000191:economics / Q000706:statistics & numerical data; D012052:Reimbursement, Incentive; D012456:Salaries and Fringe Benefits