Background The theory of managed competition holds that thequality and economy of health care delivery will improve ifindependent provider groups compete for consumers. In sparselypopulated areas where relatively few providers are required,however, it is not feasible to divide the provider communityinto competing groups. We examined the demographic featuresof health markets in the United States to see what proportionof the population lives in areas that might successfully supportmanaged competition.
Methods The ratios of physicians to enrollees in large staff-modelhealth maintenance organizations were determined as an indicatorof the staffing needs of an efficient health plan. These ratioswere used to estimate the populations necessary to support healthorganizations with various ranges of specialty services. Metropolitanareas with populations large enough to support managed competitionwere identified.
Results We estimated that a health care services market witha population of 1.2 million could support three fully independentplans. A population of 360,000 could support three plans thatindependently provided most acute care hospital services, butthe plans would need to share hospital facilities and contractfor tertiary services. A population of 180,000 could supportthree plans that provided primary care and many basic specialtyservices but that shared inpatient cardiology and urology services.Health markets with populations greater than 180,000 would include71 percent of the U.S. population; those with populations greaterthan 360,000, 63 percent; and those with populations greaterthan 1.2 million, 42 percent.
Conclusions Reform of the U.S. health care system through expansionof managed competition is feasible in medium-sized or largemetropolitan areas. Smaller metropolitan areas and rural areaswould require alternative forms of organization and regulationof health care providers to improve quality and economy.
Source Information
Address reprint requests to Dr. Kronick at the Department of Community and Family Medicine, University of California-San Diego, La Jolla, CA 92093.
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