S/HMO Versus TEFRA HMO Enrollees: Analysis of Expenditures

Health Care Financing Review, Summer, 1999 by Bryan Dowd, Steve Hillson, Tom VonSternberg, Lucy Rose Fischer

Several elements of the S/HMO model made it a more powerful intervention than previous home and community care demonstrations, thereby increasing the model's likelihood of providing cost-effective care. First, combining the authorization and provision of both acute care services and LTC under one organizational model allows better coordination between service providers and a broader scope of control for the organization as a whole. Secondly, placing the organization at risk for the cost of acute and LTC services covered by the plan creates a stronger financial incentive than in previous demonstrations to ensure that care is provided in the least costly environment that is able to meet the member's needs.

The comparison in this study, between a S/HMO and a TEFRA HMO operated by the same parent organization, differs in two important ways from earlier comparisons of S/HMO enrollees and FFS beneficiaries. First, the data allow us to observe the true marginal effect of S/HMO services, because other characteristics of the health plan are held constant by virtue of the fact that the organization providing non-S/HMO services is the same organization in both the S/HMO and TEFRA HMO. It is important to note that this study could be done only at the Kaiser or GHI site. Second, because the physician panels, clinic locations, coverage of non-S/HMO services and other health plan characteristics are identical in the two plans, the problem of self-selection bias is reduced to selection based on the availability of services covered only by the S/HMO (LTC home services, special durable medical equipment, and medical transportation and day care services) and not the TEFRA HMO. Interestingly, however, only 24 percent of S/HMO enrollees in this study used any S/HMO-specific services.

STUDY SETTING

The GHI study setting is unique because it was the only first-generation S/HMO site that made comparison data on its TEFRA HMO enrollees available for independent analysis. GHI is a non-profit, member-governed, multispecialty, staff-model group practice and managed care delivery system offering a range of HMO and other benefit plans. GHI was established in 1957 and, at the time of the study, enrolled more than 300,000 members. (In 1993-1994, GHI merged with Medcenters to become HealthPartners, Inc.) In 1992, there were 17,000 TEFRA HMO enrollees and 3,500 S/HMO enrollees. These members were served by more than 325 salaried primary care and specialty physicians on the medical staff, as well as nurse practitioners, physician extenders, midwives, and other health professionals in 55 medical and dental centers throughout the Twin Cities and surrounding area. Also available were 225 contracted primary care physicians and 800 contracted specialists. GHI managed care in a variety of ways. Hospital expenditures were managed through the use of specific treatment protocols for high-volume and high-cost diagnoses and procedures, length-of-stay criteria, concurrent review, and discharge planning. Management of ambulatory care was accomplished through screening and prevention programs, coordination of care by the primary care physician, in-house laboratory tests, use of a central After-Hours Care Team to reduce emergency room use, and provision of home care services.