Letters Health AffairsVol. 20, No. 5: The Value Of Innovation HMO Profits And QualitySteffie Woolhandler, David U. Himmelstein, Ida Hellander, and Sidney M. Wolfe AffiliationsHarvard Medical School, Cambridge, MassachusettsPUBLISHED:September/October 2001No Accesshttps://doi.org/10.1377/hlthaff.20.5.302AboutSectionsView articleView Full TextView PDFPermissions ShareShare onFacebookTwitterLinked InRedditEmail ToolsAdd to favoritesDownload CitationsTrack CitationsPermissions View articleTOPICSHealth maintenance organizationsFor-profit statusQuality of careHealthcare Effectiveness Data and Information SetData setsMedicarehealthaffHealth Aff (Millwood)Health AffairsHealth Aff0278-27151544-5208Project HOPE - The People-to-People Health Foundation, Inc.Simon Carol J., and Born Patricia H.Boston University, Boston, Massachusetts92001The Value Of InnovationThe authors respond:We appreciate the opportunity to respond to Woolhandler and colleagues. We are glad that they have read our work, and we have solid evidence that refutes their speculations. There is no evidence that omissions drive our results. First, it is important to recognize that our 1997 data are far more complete than those they used. Their 1996 sample covers 56 percent of total HMO enrollment. 1 Our 1997 sample covers more than 75 percent. Indeed, there are 120 additional plans in 1997, most which existed in 1996 but did not report to HEDIS. The plans added in 1997 have scores that are significantly lower than the plans in these authors’ analyses. Any bias runs opposite of the direction suggested. At the same time, many plans that “disappeared” between 1996 and 1997 were acquired by other HMOs in the 1997 data—including many allegedly missing Aetna plans. Firms that enter or exit a market are often different; HMOs are no exception. In our analyses we carefully compared plans that dropped out with those that entered. Both kinds of plans had somewhat lower quality scores (typically two to four points). However, on net, the expansion of coverage in 1997 pulled down scores by more than the exit of 1996 firms would have raised them. As an extreme test, we simulated what would happen if the CIGNA plans were included in our analysis, but with their 1996 reported scores. None of our findings were altered. 2 Regarding specification, a large literature confirms that firm and market characteristics affect performance. We know of no theoretical framework that speaks to regional census designation. Multicollinearity does not bias econometric results, but analyses that omit variables are prone to bias. 3We were intrigued by the remarks on for-profit firms and did some work to look into this. There is no relationship between for-profit status and board certification (correlation is .02). Interestingly, for-profit HMOs have significantly lower turnover in primary care physicians, suggesting perhaps a higher-quality strategy. We appreciate the suggestion for extending our research.Finally, we are most concerned about the misinterpretation of our results. We find no systematic relationship between for-profit status and HEDIS measures. This is neither an endorsement nor a condemnation of for-profit HMOs. In light of the variation that exists in health care quality, we believe that it is best to focus attention on forces that matter. NOTES1. D.U. Himmelstein et al., “Quality of Care in Investor-Owned vs. Not-for-Profit HMOs,” Journal of the American Medical Association 282 , no. 2 ( 1999 ): 159 –163. Crossref, Medline, Google Scholar2. Authors will gladly provide results upon request. Google Scholar3. W. Greene , Econometric Analysis, 3d ed. (Englewood Cliffs, N.J.: Prentice-Hall, 1997 ). Google Scholar Loading Comments... Please enable JavaScript to view the comments powered by Disqus. DetailsExhibitsReferencesRelated Article MetricsCitations: Crossref 4 History Published online 1 September 2001 InformationCopyright 2001 by Project HOPE - The People-to-People Health Foundation, Inc.PDF downloadCited bySocial Class and Mental Health26 March 2015 | International Journal of Health Services, Vol. 45, No. 2Work or Place? Assessing the Concurrent Effects of Workplace Exploitation and Area-of-Residence Economic Inequality on Individual Health1 January 2011 | International Journal of Health Services, Vol. 41, No. 1Taking Care of Business: HMOs That Spend More on Administration Deliver Lower-Quality Care22 June 2016 | International Journal of Health Services, Vol. 32, No. 4Overcrowding and Fiscal Pressures in Emergency MedicineHospital Topics, Vol. 80, No. 1

Context The proportion of health maintenance organization (HMO) members enrolled in investor-owned plans has increased sharply, yet little is known about the quality of these plans compared with not-for-profit HMOs.Objective To compare quality-of-care measures for investor-owned and not-for-profit HMOs,Design, Setting, and Participants Analysis of the Health Plan Employer Data and Information Set (HEDIS) Version 3.0 from the National Committee for Quality Assurance's Quality Compass 1997, which included 1996 quality-of-care data for 329 HMO plans (248 investor-owned and 81 not-for-profit), representing 56% of the total HMO enrollment in the United States.Main Outcome Measures Rates for 14 HEDIS quality-of-care indicators.Results Compared with not-for-profit HMOs, investor-owned plans had lower rates for all 14 quality-of-care indicators. Among patients discharged from the hospital after myocardial infarction, 59.2% of members in investor-owned HMOs vs 70.6% in not-for-profit plans received a beta-blocker (P<.001); 35.1% of patients with diabetes mellitus in investor-owned plans vs 47.9% in not-for-profit plans had annual eye examinations (P<.001). Investor-owned plans had lower rates than not-for-profit plans of immunization (63.9% vs 72.3%; P<.001), mammography (69.4% vs 75.1%; P<.001), Papanicolaou tests (69.2% vs 77.1%; P<.001), and psychiatric hospitalization (70.5% vs 77.1%; P<.001). Quality scores were highest for staff- and group-model HMOs. In multivariate analyses, investor ownership was consistently associated with lower quality after controlling for model type, geographic region, and the method each HMO used to collect data.Conclusions Investor-owned HMOs deliver lower quality of care than not-for-profit plans.

Despite a massive expansion of Medicaid and an upswing in the economy, the total number of Americans uninsured in 1993 was 39.7 million, more than at any time since the passage of Medicaid and Medicare in the 1960s. Since 1989, the ranks of the uninsured have swelled by 6.3 million. Millions more would be uninsured if Medicaid enrollment had not risen dramatically, by 10.5 million people since 1989. Loss of health coverage is a growing problem for middle-income families, women, and children, as it has long been for low-income families. Even in Hawaii, whose employer mandate program is often cited as a model of universal coverage, there was a large increase in uninsurance. Nationwide, the sharp upswing in the number of Americans who are uninsured has coincided with government and corporate policies to encourage medical competition and push people into managed care plans. Republican proposals to limit AFDC benefits threaten to further increase uninsurance, particularly among women and children. Only a Canadian-style single-payer reform can assure universal coverage and simultaneously contain costs.

The U.S. health care payment system is an elaborate and increasingly wasteful paper chase. This article presents new state-by-state estimates of health care administrative costs in the United States, and savings that could be realized with single-payer reform. In 1993, health care bureaucracy will consume 24.7 cents of every health care dollar, a total of $232.3 billion. Administration's share of health spending is up from 23.9 percent in 1987, and from 21.9 percent in 1983. Reducing the cost of administration to Canadian levels by adopting a single-payer health care system would cut U.S. health care bureaucracy by more than half (50.7 percent), saving at least $117.7 billion in 1993. The savings achievable with a single-payer system could fund universal access for the uninsured and improve benefits for the tens of millions of Americans who currently have only partial coverage, without any increase in overall health spending. Reform measures such as electronic billing, insurance industry consolidation, and increased competition (including "managed competition") would save little or nothing on administration. Only a single-payer reform that incorporates the "macro-management" approach to cost control, as in Canada, can achieve significant administrative savings.