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HMO quality: Does for-profit status matter?


When dollars flow to the bottom line, "effectiveness of care" gets shortchanged, right? Wrong, says a recent study.


HMO quality: Does for-profit status matter?

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Choose article section...Questions about intentions—and the data What drives differences among plans?

When dollars flow to the bottom line, "effectiveness of care" gets shortchanged, right? Wrong, says a recent study.

By Ken Terry
Managed Care Editor

If you could contract with either a for-profit or a nonprofit HMO, would you assume the nonprofit would allow you to practice higher-quality medicine? A lot of doctors would. Indeed, both the federal patients' rights legislation and the class-action suits against managed care plans proceed from the assumption that HMOs place profits before patients.

But a study published recently in Health Affairs magazine finds that whether patients belong to a for-profit or a not-for-profit plan, they receive similar preventive and chronic-disease care.

Here's something else that knocks physicians' conventional wisdom on its ear: Study authors Carol J. Simon and Patricia H. Born detect a strong correlation between plans' financial performance—including profitability and net worth—and their "effectiveness of care" scores in the HEDIS ratings released annually by the National Committee for Quality Assurance. The reason, the researchers believe, is that financially weaker plans have less money to invest in quality improvement.

Questions about intentions—and the data

Internist David U. Himmelstein, an associate professor of medicine at Harvard Medical School, doesn't believe most HMOs care about quality improvement, regardless of their financial status. "The plans can make it worse, but they have little impact on making it better. I work for nine plans. They're sending me all this stuff they want me to do, and mostly I'm ignoring it, because I'm getting nine different messages. The only thing that has an impact on quality in my practice is when they harass me enough—and most of the harassment is 'don't do this, it costs us too much money.'"

Himmelstein co-authored a 1999 study that found that for-profit plans had significantly lower HEDIS scores than not-for-profit HMOs on 14 indices, including the nine studied by Simon and Born. These markers included immunizations of 2-year-olds, mammography and Pap smear rates, and beta-blocker prescriptions after heart attacks. In contrast, the Simon and Born study found that while not-for-profit plans had higher overall quality scores, the differences were significant in only three measures.

Why do the results disagree? Himmelstein says it's because Simon and Born used flawed data from 1997, a year in which he says 35 percent of the plans submitting data to the NCQA declined to release their information publicly. Most of those HMOs, he claims, were for-profit, and he assumes they scored low on the quality measures. (A recent NCQA study confirms that publicly reporting plans do have higher scores than plans that don't release data.)

Carol Simon, associate professor of health services and director of the health economics program at Boston University's School of Public Health, defends the methodology of her study. Because of mergers and because many plans were reporting for the first time, she says, the 1997 HEDIS data from 292 plans represented more than 75 percent of HMO enrollees—a far larger sample than Himmelstein's 1996 data from 329 plans. Moreover, she says, the ratio of for-profit to not-for-profit HMOs that kept their data secret "looked exactly like the overall mix" of reporting plans.

What drives differences among plans?

As patients have gained freedom of choice and as most plans have contracted with most physicians in many areas, it has become increasingly difficult to compare quality at the health plan level, says Mark R. Chassin, professor and chairman of the department of health policy at the Mount Sinai School of Medicine in New York. "Especially for preventive measures, the plan has very little influence over what transpires at the level of interaction between individual patients and physicians."

Since most doctors contract with both investor-owned and not-for-profit plans, what accounts for the quality differences that Himmelstein found in his study? "The greediest for-profit plans have tended to contract with doctors who deliver lower-quality care," he replies.

How do HMOs find these "low-quality" doctors? "The for-profits' criteria for contracting is much more driven by price, as well as the question of which doctors take care of profitable patients," says Himmelstein. "If you want to selectively enroll healthier patients, you try not to enroll the doctors who care for the sickest patients in the community. When you're building a Medicare HMO, you don't look for the most experienced surgeons, because they're the ones who care for the sickest patients."

Simon doesn't believe that HMOs avoid the physicians who handle the worst cases. Since plans are increasingly judged on the basis of patient satisfaction, she says, they want the best physicians in their networks. Furthermore, her research shows that for-profit and not-for-profit HMOs have about the same percentage of board-certified physicians, and that there's actually less doctor turnover in for-profit plans.

NCQA President Margaret O'Kane agrees there's no evidence that doctors who contract with for-profit plans deliver lower-quality care than those who participate in not-for-profit plans. But HEDIS scores do vary substantially from one HMO to another, she notes. Much of this, she says, has nothing to do with physicians: Some plans inform members, for instance, when they're due for mammograms, Pap smears, or eye exams for diabetics. Others have disease management programs that rely largely on case managers and phone outreach.

"Another thing that plans have done pretty effectively is to benchmark physician information," she adds. "Sometimes they send doctors lists of diabetics who need an eye exam or a hemoglobin A1c test or who aren't in compliance. So there are lots of things plans can do to help physicians practice better."

Do plans' clinical guidelines and financial incentives have any impact on quality? "It depends on how much market share the HMO has," O'Kane observes. "A plan with a big market share doesn't need to provide very much financial incentive per member to motivate physicians."

Meanwhile, NCQA's latest HEDIS report shows that the average quality performance of HMOs has risen for the second year in a row. And the differences between the scores of the top 10 percent and the bottom 10 percent of plans are narrowing. That suggests that more plans are trying to improve quality, and that many physicians are responding to their efforts.


Ken Terry. HMO quality: Does for-profit status matter?. Medical Economics 2002;2:53.

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