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Quality of Care Lower in For-Profit HMOs than in Non-Profits

July, 1999

Harvard Study in Journal of American Medical Association Finds Investor-owned HMOs Worse on All Quality Measures

A study published in today's Journal of the American Medical Association (JAMA) finds that investor-owned HMOs scored worse than non-profit HMOs on all 14 quality indicators reported to the National Committee for Quality Assurance in 1997. The quality measures ranged from routine preventive care (e.g. childhood immunizations, pap smears, prenatal care, and mammography) to care for patients with serious illness (e.g. eye examinations to prevent blindness in diabetics, follow-up visits for patients released from psychiatric hospitals, and prescriptions of life-saving beta blocker drugs for patients surviving heart attacks).
Between 1985 and 1998 the proportion of HMO members enrolled in investor-owned plans increased from 26% to 62%. Until now little has been known about the quality of care in investor-owned plans. Previous research comparing HMOs with fee-for-service care has generally found similar outcomes for healthy enrollees, but sick patients have fared poorly in managed care. Most of this older research examined non-profit HMOs, whose quality is far higher than the newly dominant for-profit plans. Hence, the new research indicates that average HMO quality is lower than previously believed, and significantly worse than fee-for-service care.

Some of the biggest quality differences between investor-owned and non-profit plans were in the care of seriously ill patients. As compared to non-profit plans, investor-owned HMOs had a 27% lower rate of eye examinations for diabetics; a 16% lower rate of appropriate drug treatment for heart attack survivors; and a 9% lower rate of follow-up for patients released from mental hospitals. Childhood immunization rates were 12% lower, pap smear rates 9% lower and mammography rates 8% lower in investor-owned plans.

"Investor-owned HMOs pay more attention to their profits than to their patients," said Dr. Steffie Woolhandler, Associate Professor of Medicine at Harvard and one of the authors of the study. "Mammography rates in investor-owned plans are 8% lower. If all American women were enrolled in for-profit HMOs instead of non-profits, 5,925 more would die from breast cancer."

While the study found that costs in investor-owned and non-profit plans were similar ($128 per member, per month, vs. $127.50), investor-owned plans spent 48 percent more of their revenues on administrative costs and profits (19.4% of revenues vs. 13.1%). Hence, investor-owned HMOs spent significantly less for patient care.

"It's a simple equation," said study co-author Dr. Sidney Wolfe, Director of the Public Citizen Health Research Group. "The quest for profit endangers medical care. The more money that goes for profit, the less goes on health care."

The study analyzed 1996 quality-of-care data from 248 investor-owned and 81 not-for-profit HMOs that provided coverage to 56% of all Americans enrolled in HMOs that year. The data were submitted in 1997 to the National Committee for Quality Assurance (NCQA) from the Health Plan Employer Data and Information Set (HEDIS) Version 3.0. Fewer data are likely to be available in the future. The number of plans refusing to allow release of their data grew from 41 in 1997 (the data analyzed for the JAMA study) to 155 in 1998. The NCQA reports that lower quality plans are most likely to refuse public release of their data.

"Our decade-old experiment with market medicine is a failure," said study co-author Dr. Ida Hellander, Executive Director of Physicians for a National Health Program. "Investor-owned plans have worse quality than non-profits, and non-profits are increasingly forced to mimic the for-profits. It's time to end our race to the bottom in health care and implement nationwide quality improvement and universal coverage through single-payer national health insurance."