In recent years, most health care markets in the United States (US) have experienced rapid penetration by health maintenance organizations (HMOs) and preferred provider organizations (PPOs). During this same period, the US has also experienced slowing health care costs. Using a national database, we demonstrate that HMOs and PPOs have significantly restrained cost growth among hospitals located in competitive hospital markets, but not so in the case of hospitals located in relatively concentrated markets. In relative terms, we estimate that HMOs have contained cost growth more effectively than PPOs.

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This DataWatch examines national trends in the provision of uncompensated hospital care. It shows that rapid growth from 1983-1986 was followed by modest growth through 1990, a time during which managed care was becoming established in some regions. There was then another spurt in uncompensated care from 1991-1993, a period that corresponds to sizable increases in disproportionate-share payments. Uncompensated care growth again slowed through 1995. The increase in uncompensated care levels after 1988 appears not to have kept pace with growth in hospital expenses or the number of uninsured. However, the trend data do not suggest a large-scale reduction of effort. B ECAUSE THE UNITED STATES lacks universal entitlement, the health care system relies on charitable care by medical providers to serve the 40.6 million uninsured.1 Hospitals, in particular, serve as providers of last resort, a role enforced through legal sanctions against turning away patients with life-threatening or urgent conditions. The $17.5 billion in hospitals' uncompensated care costs in 1995, which represented 6 percent of hospital expenses, is testament to hospitals' vital role in protecting access to care. Hospitals have been able to fund uncompensated care through a delicate balance of internal and external cross-subsidies. To a large extent, this balance depends on hospitals' ability to receive reimbursement from paying patients that exceeds the cost of treating those patients, a practice referred to as cost shifting. In a few states, these cross-subsidies are made explicit through uncompensated care trust funds as part of all-payer hospital rate-setting programs or through the establishment of indigent care subsidies that offset some of the costs of charity care.3 Explicit recognition of the burden ]oycc

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This DataWatch examines the impact of hospital competition, the Medicare prospective payment system (PPS), and Medi-Cal selective contracting on the provision of uncompensated care by private hospitals in California during 1980-1989. It finds that hospitals subject to more intense competition and greater fiscal pressure from Medicare and Medi-Cal reduced their provision of uncompensated care relative to hospitals facing less pressure from these sources. We estimate that had hospitals not been subjected to increasing price competition from growth of managed care plans and financial tightening in public programs, they would have provided 36 percent more uncompensated care than was actually provided in 1989.