Preliminary data gathered by a congressional advisory panel indicate that as managed care moves into a market, hospitals get better at controlling costs.
However, the study also shows hospitals react to lower payments by reducing uncompensated care.
According to the Prospective Payment Assessment Commission, which advises Congress on Medicare hospital payment issues, hospitals in markets with high managed-care penetration rates saw a nearly 5% decrease in the ratio of payments to costs for private payers from 1992 to 1994. In contrast, hospitals in areas where managed care is not a significant factor experienced a more than 4% jump in the ratio of payments to cost.
ProPAC analyst Sarah Thomas said that based on a limited sample of hospitals, it appears that the downward pressure on payments to hospitals in areas with a high managed-care presence has forced the hospitals to control costs better than hospitals in other areas.
Another way hospitals appear to deal with reimbursement pressures is to reduce uncompensated care.
According to ProPAC, from 1992 to 1994, hospitals in high managed-care areas reduced their uncompensated care by nearly 5% while hospitals in markets with little managed care saw only a 0.1% decrease.
"It does appear that uncompensated care is being squeezed out," Thomas said. However, she added that because one component of total uncompensated care is bad debt, it's possible that as managed-care plans reduce payments, hospitals "get better at reducing bad debt."
During a ProPAC meeting earlier this month, commissioners expressed concern that the relationship between managed care and uncompensated care may be a public policy concern.
Deborah Williams, senior associate director of policy development for the American Hospital Association, said the findings were "very interesting, but there are a lot of other factors that need to be studied further to see if there is really a relationship between uncompensated care and managed-care penetration."