The changing effect of HMO market structure: an analysis of penetration, concentration, and ownership between 1994-2005
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We analyze the role of three aspects of HMO market structure -- HMO penetration, HMO plan concentration, and HMO for-profit share on explaining hospital cost and revenue growth during the HMO expansion period (1994-1999) and backlash period (2000-2005). We find HMO penetration effects differed over time: a 10 percentage point increase in HMO enrollment leads to 2.5 percent reduction in cost and revenues in the expansion period but only 0.4-1 percent reduction in the backlash period. Furthermore, the HMO backlash efffect can be attributed to HMO dis-enrollment as well as the changing nature of HMO product. We find that revenue increases at a slower rate (by about 5 percent) in markets with relatively concentrated HMO markets power and more competitive markets. Finally, increased for-profit HMO presence is associated with smaller cost and revenue growth, and the effect differs between low and high penetration markets.