Does Spending on Medical Services Change as Hmos Grow and Mature?

28 Pages Posted: 17 Aug 2000 Last revised: 8 Oct 2010

See all articles by Patricia Born

Patricia Born

Florida State University - College of Business; Florida State University - College of Law; California State University, Northridge - Department of Finance, Real Estate, & Insurance

Rosalie Liccardo Pacula

Health Economics, Finance and Organization, RAND Corporation; National Bureau of Economic Research (NBER)

Date Written: February 1998

Abstract

This research examines the cost structure of a nationally representative sample of HMOs from 1991-1994 to determine whether cost savings achieved through enrollment growth and age of the plan are shared with any of the factors of production. The data are obtained from Health Care Investment Analysts. A generalized translog cost function is used to derive factor share equations for four intermediate groups of inputs used by an HMO: physician services, other medical provider services, hospital services and administrative services. We estimate the system of annual factor shares using seemingly unrelated regression analysis and find that both plan size and age have a significantly positive effect on the level of plan expenditure on physicians, other medical providers and hospitals. Examination of the changes in factor shares over time, however, indicates that large changes in membership have no significant effect on the amount of resources dedicated to physicians. Only hospitals see a significant increase in the change in factor share at the expense of administrative services.

Suggested Citation

Born, Patricia H. and Pacula, Rosalie Liccardo, Does Spending on Medical Services Change as Hmos Grow and Mature? (February 1998). NBER Working Paper No. w6423. Available at SSRN: https://ssrn.com/abstract=226170

Patricia H. Born (Contact Author)

Florida State University - College of Business ( email )

250 Rovetta Business Building
Tallahassee, FL 32306-1110
United States

Florida State University - College of Law

425 W. Jefferson Street
Tallahassee, FL 32306
United States

California State University, Northridge - Department of Finance, Real Estate, & Insurance ( email )

Northridge, CA 91330-8379
United States

Rosalie Liccardo Pacula

Health Economics, Finance and Organization, RAND Corporation ( email )

P.O. Box 2138
1776 Main Street
Santa Monica, CA 90407-2138
United States
310-393-0411 (Phone)
310-451-6930 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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