The Impact of Health Maintenance Organization Penetration on the Use of Hospitals That Serve Minority Communities

Abstract

Health maintenance organization (HMO) penetration has made hospital markets more price competitive. Hospitals in minority communities may be at a competitive disadvantage because they serve patients who are, on average, sicker and more likely to be uninsured or underinsured. This study estimated the impact of HMO penetration on the use of hospitals in minority communities during 1987 to 1992. Using a sample of 1,413 short-term general hospitals from the 85 largest metropolitan statistical areas, the determinants of hospitals' patient volumes were estimated. Hospitals located in predominately nonwhite neighborhoods were designated minority hospitals, and other hospitals were designated nonminority hospitals. Using regression analysis, the impact of HMO penetration and concentration on hospitals' patient volumes were estimated. By interacting the HMO penetration and concentration variables with a minority hospital indicator variable, HMOs' impact on minority hospitals was calculated. Health maintenance organization penetration was correlated with lower patient volumes in minority hospitals and higher patient volumes in nonminority hospitals. Competition in HMO markets was correlated with lower patient volumes for all hospitals. This effect was stronger for minority hospitals. These findings suggest that minority hospitals may be at risk of losing patients as HMO penetration increases.