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Differences in U.S. Hospital Service Utilization between Traditional Medicare and Medicare HMO Patients

JHHSA, Vol. 27 No. 3, (2004)

This study examines the differences between traditional U. S.
Medicare and Medicare HMO Florida inpatient hospital utilization
during the years 1992-1998, using nine high volume Diagnosis Related
Groups. Utilization was measured by the number of ancillary services
consumed, as well as the charges for those services. The analyses
controlled for differences in utilization due to patient age, race, hospital
size, year and market differences in hospital costs. Patient data were
severity-adjusted and the analysis focused on the patients at the highest
severity level. The study found that Medicare HMO patients with
chronic diseases at the highest severity of illness level consumed
significantly more services than traditional Medicare patients with the
same chronic diseases. It was concluded that these Medicare HMO
patients were either sicker (despite the severity adjustment) than the
traditional Medicare patients and/or Medicare HMOs used different
production processes than traditional Medicare, perhaps in order to
minimize length of stay. Medicare HMO patients with acute illnesses at
the highest severity level did not, in general, consume significantly
more services than traditional Medicare patients at the same level of
severity for the same diagnoses. The results imply that Medicare policy
with regard to HMO expansion may not result in cost savings, and may,
instead, result in higher costs if the proportion of the Medicare
population hospitalized with chronic illnesses increases.

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