Summary

A Clinical Practice Improvement study was conducted at six HMOs throughout the US to determine the effect of HMO cost-containment strategies on outpatient visits, hospital admissions, and prescriptions on patients with at least one of five diseases (arthritis, asthma, epigastric pain/ulcer, hypertension, and otitis media). Data were collected from 13,000 patients at every encounter for one year. Results show that for four study diseases (not otitis media), greater levels of formulary limitations on drugs to treat these diseases were associated significantly with higher rates of emergency department visits and hospitalizations and positively (but not always significantly) with drug cost, drug count, and office visits.

Primary Objective

Examine the association of various HMO cost- containment strategies with utilization of outpatient visits, hospital admissions, and prescriptions.

Methods

1. 13,000 patients from six HMOs throughout the US were assessed for severity of illness at every encounter for one year, totaling more than 99,000 outpatient visits, 480 emergency department visits, 1,000 hospitalizations, and 240,000 prescriptions.
   

2. Patients had at least one of five diseases (arthritis, asthma, epigastric pain/ulcer, hypertension, and otitis media).
   

3. HMO settings had various levels of cost-control measures, including visit copayments and formulary limitations on drugs to treat the five study diseases.
   

4. Outcome measures were prescription count and cost, office visit count, emergency department count, and hospitalization count.
   

5. Multivariate regression was used to control for other variables, including severity of illness, provider count, age, gender, and time in study.

Results

1. For four study diseases (not otitis media), greater levels of formulary limitations on drugs to treat these diseases were associated significantly with higher rates of emergency department visits and hospitalizations and positively (but not always significantly) associated with drug cost, drug count, and office visits.
   

2. Stricter second-opinion requirements, salaried physicians, and strictness of case management had mixed, mostly nonsignificant, associations with drug and other resource utilization.
   

3. Visit copayment was always associated with lower drug utilization but was mixed in its association with office visits, emergency department visits, and hospitalizations.
   

4. Strictness of gatekeeper was associated with lower drug utilization, emergency department visits, and hospitalizations, and had a mixed effect on office visits.

Impact

The findings suggest the need for a systems approach to cost containment rather than individual component management techniques that ignore the interactions among components of care. The HMO site with the most restrictive drug formulary for a disease used up to twice as much health services as the HMO with the least restrictive drug formulary for that disease. Only by focusing on the important patient characteristics and process steps associated with better outcomes for a given disease can we hope to reduce cost substantially, while ensuring quality care (Amer. J. Managed Care, 2:3, March 1996:237-247).