Competition in health care may not result in better quality

Apr 7 2005

For several decades, competition within the health care industry has been touted as the way to curb rising prices by reducing inefficient practices and improving quality and safety. But a study of 341 HMOs suggests that more competition may not automatically solve price and quality-of-care problems as hoped for by legislators, regulators and employers.

"Our findings show that less, not more, competition was associated with better health plan performance in several -- though not all--factors," says lead author Dennis Scanlon, associate professor of health policy administration at Penn State. "This finding seems counterintuitive, but it is possible that more HMO competition may result in providers finding it difficult to respond to competing quality initiatives. Also, competition may be focused more on driving down the plans' premiums, resulting in less attention to quality."

Scanlon; Shailender Swaminathan, University of Alabama at Brimingham; Michael Chernew, University of Michigan; James Bost, University of Arkansas for Medical Sciences; and John Shevock, Penn State, analyzed data from 341 HMO plans operating across various markets in the United States. They examined HMO enrollment and the most widely used measures of HMO performance: the Health Plan Employer Data and Information Set (HEDIS) and the Consumer Assessment of Health Plans Survey (CAHPS). They published their findings in the current (April) issue of the journal, Medical Care.

HEDIS measures the percentage of a health plan's eligible population that is compliant with recommended care guidelines such as immunization rates for children and teens; chronic illness care; and women's care (e.g. breast cancer screening rates). CAHPS includes members' opinions about their health care and services provided by their health plan and its affiliated physicians.

Other managed care programs, such as PPOs (Preferred Provider Organizations), should be studied as well, but similar data is not routinely collected for these other insurance options and hence is not available for analysis even though PPOs have passed HMOs in popularity for the employed population, Scanlon notes.

However, if one compares the performance of HMOs against HMO competition, HMOs in less competitive markets perform better on HEDIS' women's care measures and the CAHPS factors, but show no difference in performance on childhood or adolescent immunization or the management of chronic illness. Performance is better in markets with a greater percentage of HMO enrollment, researchers say.

Another problem with the quality measurement systems is that even HMOs are not required to publicly report or disclose their results on the HEDIS and CAHPS measures. The researchers found that plans that make their data available publicly performed significantly better on both HEDIS and CAHPS measures.

"Since public reporting remains voluntary, consumers cannot make informed decisions if comparable data for plans is not available," Scanlon says. "Therefore, health plan report cards should list those plans that don't make public disclosures."

For-profit plans performed similarly with not-for-profit plans as well, the study says.

The researchers were looking at the relationship between HMO quality and HMO competition at a point in time, and hence additional research is needed to identify the effect of changes in competition over time. Scanlon notes, "While our study offers some insight into the association between competition and quality, policymakers, regulators and plan purchasers such as employers need better evidence to understand and evaluate the benefits and costs of competitive versus regulatory policies.

"The health care environment is complicated and multi-layered, and perhaps the most effective change may require a mix of approaches involving competition and regulation to ensure patient safety and quality of care. For example, the automotive industry is highly competitive, but certain elements such as emissions, fuel efficiency and safety measures are regulated," he adds.