Himmelstein DU, Woolhandler S, Hellander I, Wolfe SM. Quality of Care in Investor-Owned vs Not-for-Profit HMOs. JAMA. 1999;282(2):159–163. doi:10.1001/jama.282.2.159
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
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
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 β-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
Conclusions Investor-owned HMOs deliver lower quality of care than not-for-profit
Health maintenance organizations (HMOs) have been both derided and defended.
Studies comparing HMOs with fee-for-service care have generally found similar
outcomes for the average, healthy enrollee. However most,1- 8
but not all,9,10 studies have
found worse outcomes in managed care for vulnerable groups (ie, the seriously
ill, the mentally ill, and the poor). Both patients and physicians are less
satisfied with care delivered through HMOs.11- 16
Most research on quality of care in HMOs has examined nonprofit group-
and staff-model plans. Yet other types of HMOs have accounted for most of
the recent increase in enrollment. Between 1985 and 1998 the proportion of
HMO members enrolled in investor-owned plans increased from 26% to 62%; between
1980 and 1998 the market share of group- and staff-model plans decreased
from 81% to 12%.17,18
In investor-owned plans, executives' primary fiduciary duty is to shareholders,
who are vitally concerned with profits but unlikely to receive their medical
care in the plan. However, a major concern is whether the quest for profit
compromises the quality of care.
We analyzed data from the National Committee for Quality Assurance's
(NCQA's) Quality Compass 1997 including the Health Plan Employer Data and
Information Set (HEDIS) (version 3.0) and HMO accreditation surveys.19 The data reflect plan characteristics and performance
HEDIS is a set of standardized quality, utilization,
financial, and other indicators designed to allow comparisons of managed care
plans. A total of 329 HMOs (248 investor-owned and 81 not-for-profit) in 45
states and the District of Columbia provided at least some HEDIS quality,
utilization, and financial measures. Forty-one additional plans that provided
data to the NCQA declined to allow release of their data.
NCQA's HEDIS data set includes information on ownership status (investor-owned
or not-for-profit), model type (group, staff, independent practice association,
network, mixed, or other), and region (New England, mid Atlantic, south Atlantic,
east north Central, west north Central, south Central, Mountain, or Pacific).
If data on HMO ownership in 1996 were missing, we consulted InterStudy's HMO
Directory,20 or telephoned the plan. Firms
that owned more than 1 HMO submitted separate data for each plan or line of
business (eg, Kaiser Foundation Health Plan Inc operated 13 distinct plans
that each reported HEDIS data). Our unit of analysis was the individual plan.
Many HMO firms failed to supply the NCQA with accurate data on
total enrollment, Medicaid or Medicare enrollment, patient demographics, or
plan age (in some cases the HMO apparently reported data for the entire firm
rather than for individual plans or lines of business). Hence, we could not
reliably analyze these variables.
We examined all 14 quality-of-care
variables included under the NCQA's rubric "Effectiveness of Care" for which
data were available. For instances in which data included implausible rates
(eg, an immunization rate of 0%), we recoded the value as missing. The NCQA
requires HMOs to follow a detailed guide defining each measure and specifying
standards for data submission.21 Plans may
collect data to calculate their rates from administrative records (administrative
method), or supplement administrative data with chart reviews (hybrid method).
The hybrid method, used by more than 90% of plans, usually results in higher
For each quality indicator, the administrative
method requires that the plan identify the target population: patients continuously
enrolled in the HMO for an appropriate period (eg, 1 year for Papanicolaou
tests and immunizations, 2 years for mammograms, or 7 days after hospital
discharge for β-blocker usage after myocardial infarction) and for whom
the particular intervention is clinically appropriate (eg, women aged 52-69
years for mammography). For most indicators, patients whose coverage was interrupted
for up to 45 days per year are also included. The HMO then searches administrative
records (eg, payment and pharmacy files) for evidence that the intervention
occurred. If no evidence of the intervention is found, the HMO may choose
to search for exclusions (eg, a history of bilateral mastectomy would exclude
the need for mammogaphy). The reported rate is the number of patients receiving
the intervention divided by the number eligible and without exclusions.
For the hybrid method, the plan chooses a sample of eligible patients
from among the target population identified as in the administrative method.
For most measures, a minimum sample size of 411 patients (after all exclusions)
is required. For plans that have previously documented high rates for a particular
intervention, somewhat smaller sample sizes are allowed (because for any given
sample size the SE of the percentage becomes smaller when rates rise above
50%). For instance, the hybrid method requires a minimum sample size of 313
for a plan that had previously documented a Papanicolaou test rate of 75%.
As in the administrative method, the plan initially searches administrative
records for evidence that the intervention occurred or that the patient should
be excluded from the measure. If administrative records do not give evidence
of the intervention or of an exclusion, the plan reviews patient charts for
such evidence and calculates a rate using the administrative method.
We also examined total costs per member per month and the medical loss
ratio, defined as total medical and hospital expenses divided by total revenues
from premiums, fee-for-service, Medicare, and Medicaid.
We used t tests to evaluate differences in univariate comparisons
of rates. We performed multiple linear regressions to analyze the association
of ownership status with quality indicators after control for region (8 categories),
the method used by the plan to collect data (administrative or hybrid), and
HMO model type (6 categories). All analyses used SAS software.22
Table 1 compares the characteristics
of the 329 plans we analyzed with those of all HMOs in the United States.
Compared with plans in the NCQA sample, nonparticipating plans were smaller,
newer, more likely to be group or mixed model, and to be located in the east
north Central region.23 Similar proportions
of investor-owned and not-for-profit plans submitted quality-of-care data.23
In univariate comparisons, investor-owned
plans had lower rates for all 14 quality indicators (
Table 2). The largest differences were in the 2 measurements of
the quality of care for patients with serious medical illnesses. Among patients
discharged from the hospital after a myocardial infarction (with no concurrent
diagnosis contraindicating β-blocker therapy), on average 59.2% of patients
in investor-owned HMOs compared with 70.6% of patients in not-for-profit plans
filled a prescription for a β-blocker (P<.001).
Among patients with diabetes receiving insulin or oral hypoglycemic agents,
on average 35.1% of those in investor-owned plans vs 47.9% in not-for-profit
plans had received an eye examination within the past year (
Investor-owned plans also had
lower rates of all routine preventive services that we evaluated (Table 2). The rate of completion of immunizations
for 2-year-olds averaged 63.9% in investor-owned HMOs vs 72.3% in not-for-profit
plans (P<.001); the proportion of women aged 52
to 69 years who had undergone mammography within the past 2 years averaged
69.4% in investor-owned plans and 75.1% in not-for-profit plans (
P<.001). Staff- and group-model HMOs had higher scores on virtually
all quality-of-care indicators (Table 3
). Plans in New England scored better than plans in other regions
for most indicators (data not shown).
In multivariate analyses controlling
for model type, method of data collection, and region, investor ownership
was consistently associated with poorer quality (
Table 4). For instance, investor ownership was associated with decreases
in rates of mammography of 4.8 percentage points and of eye examinations for
patients with diabetes of 9.7 percentage points. As expected, plans that used
the hybrid method for data collection tended to report higher rates (eg, 1.4%
higher for mammography). Staff- and group-model types, as well as a location
in New England, continued to predict higher quality for most quality indicators.
Total cost per member, per month
averaged $128.00 in investor-owned plans vs $127.50 in not-for-profit plans
(P=.88). The medical loss ratio (percentage of revenues
spent on medical and hospital services) averaged 80.6% in investor-owned HMOs
vs 86.9% in not-for-profit plans (P=.05). Hence,
spending on profit and administrative overhead was about 48% higher in investor-owned
plans (19.4% vs 13.1% for not-for-profit plans).
Investor-owned HMOs now dominate the managed care market.24,25
However, our study suggests that these plans are associated with reduced quality
of care. Although total costs are similar in investor-owned and not-for-profit
plans, the latter spend more on patient care. Group- and staff-model plans
that offer better quality are also being eclipsed. The medical market is not
rewarding quality and efficiency.
Our findings are consistent
with the scant previous reports on the influence of investor ownership on
HMO quality. An analysis of 1994 data from 76 HMOs found that investor-owned
plans provided less preventive care.26 Comparisons
of HMO quality published in popular magazines have reached similar conclusions.27,28 Investor-owned Medicare HMOs have
higher disenrollment rates29 and lose more
beneficiary appeals than not-for-profit plans.30
Physicians in Minneapolis rated care at a staff-model plan better than at
2 network model HMOs.31 A Centers for Disease
Control and Prevention analysis of 4 preventive services, using HEDIS data
that excluded Medicaid and Medicare recipients, found regional patterns similar
to those we report.32
the differences we observed in this study appear to be clinically significant.
For instance, if all 23.7 million American women between ages 50 and 69 years
were enrolled in investor-owned, rather than not-for-profit plans, an estimated
5925 additional breast cancer deaths would be expected (based on our finding
of a 4.8% difference in screening rates, and previous estimates that biennial
screening in this age group would result in 52 fewer breast cancer deaths
by age 80 years per 10,000 women screened).33
Similarly, since β-blockers reduce death rates in myocardial infarction
survivors by 23%,34 their underuse in investor-owned
plans suggests that many such patients may die needlessly.
the HEDIS quality indicators we analyzed have serious shortcomings.35 No indicators appraise the outcomes of care. Most
focus on relatively inexpensive preventive services and exclude patients who
are not continuously enrolled. Few HEDIS measurements address care for seriously
ill or chronically ill patients who are financially unattractive to HMOs and
at risk for underservice. Medicare HMOs apparently encourage sick patients
to disenroll36 and selectively recruit and
enroll healthy individuals.37- 39
Hence, our finding that the 2 quality indicators relevant to patients with
serious medical illnesses showed the sharpest differences is particularly
disturbing. Moreover, plans may narrowly focus quality improvement efforts
on the few services that HEDIS assesses, causing an upward drift of HEDIS
scores that may not accurately reflect global quality trends. For instance,
HMO administrators may push clinicians to increase mammography rates, but
deny them the time needed to perform optimal clinical breast examinations,
patient education, or other clinical activities that HEDIS does not measure.
Hence, the usefulness of HEDIS quality indicators as surrogate measures of
the global quality of care may deteriorate over time.
these limitations, the data we analyzed are the best available currently.
They encompass plans that account for more than half of the HMO enrollment
in the United States. The data were collected and reported in standard formats
and have been found accurate in federal audits.40
Unfortunately, even fewer data may be available in the future. In 1997 (the
data that we analyzed, which reflects 1996 figures but was submitted in 1997)
only 41 plans that submitted information to the NCQA declined to allow release
of their data; in 1998, 155 plans refused data release.
reporting could explain our findings only if not-for-profit plans consistently
inflated their quality measures while investor-owned HMOs did not. We cannot
rule out the possibility that systematic differences in market characteristics,
patients, physicians, HMO data systems, or other unmeasured confounders could
influence our results.
Our findings are worrisome in light of
previous research comparing the quality of care in HMO and fee-for-service
settings. Most such comparisons examined care in not-for-profit group- and
staff-model HMOs, which we found to have higher quality scores than the average
plan. Moreover, the best of this research was carried out before market pressures
forced nonprofit HMOs to increase financial incentives and productivity pressures
for physicians, abandon community rating, and implement other measures that
mimic investor-owned plans.24,25
In these nonprofit, group- and staff-model HMOs of an earlier era, the average
healthy patient received similar or slightly more preventive care, but vulnerable
patients fared poorly1,2,4- 7
(eg, the risk of dying for sick, poor patients was increased by 21%).1
Our findings suggest that the decade-old
experiment with market medicine is a failure. The drive for profit is compromising
the quality of care, the number of uninsured persons is increasing, those
with insurance are increasingly dissatisfied, bureaucracy is proliferating,
and costs are again rapidly escalating. We believe national health insurance
deserves a second look.41,42
Disclaimer: Data analyzed in this study were from NCQA's Quality Compass and are published with the permission of the NCQA. The views expressed are those of the authors and not of NCQA.