Is Managed Care Still An Effective Cost Containment Device?
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Authors
Shen, Yu-Chu
Melnick, Glenn
Subjects
managed care growth
hospital competition
cost and revenue
hospital competition
cost and revenue
Advisors
Date of Issue
2005-10
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Abstract
In this paper we take a historical perspective to examine the effects of managed care growth and hospital competition on hospital cost and revenue growth during managed care’s boom period (1990-1994), its mature period (1994-1998), and its backlash period (1998-2003). We find that while higher managed care presence was indeed effective in slowing down hospital cost and revenue growth during the boom and the mature periods, it lost its cost containment effect during the backlash period. This result persists under different estimation methods designed to reduce biases that might result from omitted variable bias and measurement errors. On the other hand, competition effects appear to persist throughout the three periods. However, such persistent competition effects were initially the result of aggressive selective contracting in the high managed care markets, but were later dominated by the less saturated, but growing, managed care markets that seem to catch up with the more developed markets.
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Article
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Department
Business & Public Policy (GSBPP)
Organization
Naval Postgraduate School (U.S.)
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This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.