The Competitive Effects of Health Maintenance Organizations
The rising cost of health care is a serious problem in the United States today. This thesis examines the competitive effect of Health Maintenance Organizations (HMOs) on traditional providers of health care as a mechanism for cost control. First, a theoretical foundation for addressing the issue is provided. Three models of health care providers are developed: a dynamic model of an HMO; a model of a hospital providing services on a cost-based retrospective basis; and a hospital providing services to both charge-paying and cost-paying patients. From these models, two hypotheses emerge: (1) an increase in HMO presence in a market will lead to a decrease in hospital expenses; and (2) as HMO presence increases, the mix of hospital services provided will change, with a decrease in hospital inpatient utilization, and more reliance on less expensive ambulatory care.
University of Illinois - Urbana-Champaign
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University of Illinois at Urbana-Champaign