HMOs "Cut Costs, Not Care," Says Study

Health maintenance organizations and other managed care programs in the USA are cutting hospital costs without hurting quality of care, and hospitals in cities with high use of managed care generally perform better than those in cities with medium or low use, says a KPMG Peat Marwick study of 1,400 hospitals in the top 50 cities in 1994.

Compared to national averages, hospitals in cities with high HMO usage had 11.2% lower costs, 6.3% shorter stays and 5.3% lower death rates. The rate of illness complications in cities with high use of managed care was 0.9% higher than the national average, but KPMG said this was not statistically significant. Cost and length of stays (but not quality) in 2,300 hospitals in smaller cities are often less efficient, it found, leading to higher costs even if patient stays are shorter. The results of the study are roughly comparable to those of one done the year before.

The study did not separate hospital patients covered by managed care from those in traditional plans; KPMG said there is not data on enough cities for valid comparisons. But hospitals where many patients are covered by managed care have taken steps to become more efficient overall. Some do medical tests faster to prevent patients from taking up bed space and some hire outside professionals to do non-medical tasks more cheaply. Some of these efficiency moves have aroused the ire of doctors, nurses and patents, but the study puts paid to the idea that managed care is substandard, says KPMG.