Even without passage of comprehensive reform, the health care system is undergoing a fundamental restructuring. Market forces and managed care are at the core of this transformation. Not only has managed care grown. but wider acceptance has engendered an evolution in the organizational structure of managed care firms and their contractual relationships with providers. Yet, despite the upsurge in managed care, many policymakers remain skeptical about its ability to slow the rate of growth in health care expenditures. Until now, only limited research has been performed to evaluate its effects. Most existing research is regional in focus. not national, leading to doubts about the generalizability of these studies. Absence of the necessary market-level data has been a key reason for the paucity of empirical research on market-based approaches. We have spent several years collecting the necessary data to build a national market-level database that includes measures of health sector performance and measures of hospital, physician, and insurer market structure. We will use this unique market-level database to study how the interaction of market competition and managed care in three linked markets - hospital, physician, and insurer - affects hospital utilization, costs, revenues, and uncompensated care delivery in the U.S. By building upon our database, we can produce national estimates of the potential cost savings of competition and managed care in the first year of the project. The national study will use eleven years (1982-93) of data from over 5000 general acute care hospitals. In addition to the national database, we propose to construct a rich micro-market level database that will allow us to tea specific hypotheses about the interaction of managed care and competition and the bargaining behavior of hospitals. HMOs, and PPOs. The micro study will use eight years (1987-95) of data from two of the largest managed care plans (a PPO and an HMO) in California. Findings from the national analyses are expected to contribute to the ongoing policy debate about the current and potential effects of managed care growth on a wide range of health performance measures. Findings from the micro-market analyses can contribute to our theoretical and operational understanding of how various managed care players operate in the market.
