HMOs significantly cut costs, survey shows


NEW YORK -- Managed-health-care plans markedly reduce hospital costs, length of hospital stays and mortality rates, a new study shows.

The survey of 1,300 hospitals looked at 50 U.S. cities with low, moderate and high levels of managed care, ranked by the percentage of the population enrolled in the plans and other factors.

In cities with a high concentration of managed care -- including Los Angeles, Portland, Ore., and Minneapolis -- discretionary hospital costs were an average of 11.5 percent lower than the national norm.

In cities with moderate levels of managed care -- including Atlanta, Dallas, Boston and Chicago -- costs were an average of 3.6 percent higher than the norm.

Discretionary costs are the portion of total expenses not attributable to severity of illness or cost-of-living factors.

Patient stays are significantly shorter in markets with more managed care, with visits an average of 16.9 percent shorter than expected for the severity of illness. That compares with visits that are 17.5 percent longer than expected in cities with little managed care.

Hospital mortality rates were an average of 8 percent lower than expected, based on the clinical condition of patients, in high managed-care markets. The rate was 2 percent lower than expected in markets with little managed care. Rates were lower in all markets studied because the survey only ranked metropolitan areas.

The study, conducted by the New York-based accounting firm KPMG Peat Marwick, tracked hospitals during 1993. "Not only do these numbers point to opportunities for significant cost savings without an adverse impact on clinical outcomes, they also suggest that managed care may have a positive impact on patient care," said Michael Hamilton of KPMG's health-care unit.

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