HEALTH MAINTENANCE ORGANIZATIONS (HMOs) Segmentation Of Hospital Markets: Where Do HMO Enrollees Get Care?

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1 SEGMENTATION OF HOSPITAL MARKETS Segmentation Of Hospital Markets: Where Do HMO Enrollees Get Care? This study of southeast Florida suggests that HMOs may not be getting the best hospital care for their enrollees. by fosé]. Escarce, Judy A. Shea, and Wei Chen ABSTRACT: Commercially insured and Medicare patients who are not in health maintenance organizations (HMOs) tend to use different hospitals than HMO patients use. This phenomenon, called market segmentation, raises important questions about how hospitals that treat many HMO patients differ from those that treat few HMO patients, especially with regard to quality of care. This study of patients undergoing coronary artery bypass graft surgery found no evidence that HMOs in southeast Florida systematically channel their patients to highvolume or low-mortality hospitals. These findings are consistent with other evidence that in many areas of the country, incentives for managed care plans to reduce costs may outweigh incentives to improve quality. DATAWATCH 181 HEALTH MAINTENANCE ORGANIZATIONS (HMOs) obtain medical care for their members through selective contracting. Under selective contracting, HMOs negotiate prices and other contract terms with medical care providers and then offer incentives to members to use only contracting providers. 1 Studies have found that selective contracting for inpatient hospital care by HMOS has profound effects on hospital markets. Traditionally, hospitals competed for patients and physicians on nonprice, or quality, dimensions. 2 An important goal of selective contracting is to introduce price competition into hospital markets. 3 Documented consequences of selective contracting and enhanced price competition include lower hospital prices and price/cost margins, slower growth in hospital costs and revenues, and reduced provision of charity care. 4 A result of selective contracting that remains largely unexplored is the segmentation of hospital markets according to whether pa- José Escarce is a senior natural scientist at RAND, in Santa Monica, California. ]udy Shea is a health services researcher and psychometrician and Wei Chen is a programmer at the University of Pennsylvania. H E A L T H A F F A I R S - N o v e m b e r / D e c e m b e r The Pcopk'to-Pcopk Health Foundation, Inc.

2 D A T A W A T C H 182 HOSPITAL MARKETS tients are in HMOs. By segmentation, we mean that HMO patients are more likely than insured patients who are not in HMOs to be admitted to particular hospitals, based solely on their type of insurance. Typically, certain hospitals in a market area are more attractive to HMOs than other hospitals in the same area are. Attractive hospitals may be those that cooperate better than other hospitals with HMOs' contracting personnel, grant larger discounts to HMOs, offer the range of services desired by HMOs, or exhibit a generally positive attitude toward managed care. 5 Such hospitals are likely to have many HMO contracts and to treat a high proportion of HMO patients. The phenomenon of market segmentation raises important questions about how hospitals that treat large numbers of HMO patients compare with other hospitals, especially with regard to quality of care. In theory, HMOs might be expected to exploit their substantial economies of scale in acquiring and processing information to choose hospitals that provide high quality, or at least an acceptable minimum level of quality, at relatively low cost. In practice, however, many HMOs assess quality only informally, using only subjective measures such as hospital reputation. Use of objective data on hospital performance and outcomes is unusual and ad hoc, except possibly in some mature managed care markets with high HMO penetration. 6 In this DataWatch we examine the segmentation of the hospital market in southeast Florida, an area characterized by high health care expenditures, rapid growth in HMO penetration in both the commercial and Medicare sectors, and competition among many small HMOs. Our analyses focus on coronary artery bypass graft (CABG) surgery. CABG surgery is an ideal procedure to study for several reasons. First, it is a high-volume procedure that is performed in both community hospitals and academic medical centers. Second, it has been the subject of quality report cards and quality improvement efforts in several states, although not in Florida. 7 Third, a strong relationship between hospital CABG volume and outcomes is well established; thus, CABG volume is a readily available proxy for quality. 8 The objective of this DataWatch is to describe the degree of market segmentation and to assess how hospitals where HMOs tend to concentrate their CABG patients differ from hospitals that perform few CABG operations on HMO patients. We examine the associations between HMO shares of hospital patients and several hospital characteristics, including CABG volume, CABG mortality, and resource use for CABG patients. Data and methods. The data for this study came from the hospital discharge files from the state of Florida for These files HEALTH AFFAIRS - Volume 16, Number 6

3 SEGMENTATION OF HOSPITAL MARKETS contain detailed information on each admission to an acute care hospital in Florida, including patient demographic characteristics, ZIP code of residence, type of insurance, principal diagnosis and up to nine secondary diagnoses, up to ten surgical procedures, lengthof-stay, whether the patient died in the hospital, a hospital identifier, and total hospital charges. We used the reported surgical procedures to identify CABG patients who did not undergo another major cardiac procedure such as valve replacement. Using the type of insurance variable, we identified patients with private commercial insurance who were not in HMOs, patients in commercial HMOs, Medicare patients who were not in HMOs, and patients in Medicare HMOs. 1 We used an iterative algorithm to construct a market area for study that was self-contained with regard to CABG operations (that is, that had a minimal number of CABG patients who went outside the area for surgery and a minimal number of CABG patients who lived outside the area and came in for surgery). 11 The resulting market area contained 215 ZIP codes in southeast Florida and included sixteen hospitals where CABG surgery was performed (of fifty-one CABG hospitals in the state). Only.9 percent of the CABG patients who resided in the area received their surgery outside the area, and only 4.4 percent of the CABG operations performed in area hospitals were done on patients who resided elsewhere. We used the discharge data to calculate case-mix-adjusted CABG mortality rates for the hospitals in the southeast Florida market. 12 In addition, the discharge data were linked with the 1994 American Hospital Association Annual Survey of Hospitals, which contains information on hospital characteristics such as number of beds, teaching status, and ownership and with the 1993 Medicare cost reports. Hospital cost-to-charge ratios from the cost reports were multiplied by each CABG patient's total hospital charges to obtain a measure of accounting costs. DATAWATCH 183 Results The southeast Florida market. The southeast Florida market area encompassed,, and Palm Beach Counties and part of Martin County; its population in 1994 was approximately 4.5 million. The study market area historically has had high per capita health care expenditures. For instance, annual Medicare spending per aged beneficiary was more than 5 percent above the national average. 13 In 1993 the area had 49 acute care hospital beds, seventy-two primary care physicians, and 144 specialists per 1, population. 14 Total HMO penetration, including both commercial and Medicare HMOs, grew from 1 percent of the popula- H E A L T H A F F A I R S - N o v e m b e r / D e c e m b e r

4 D A T A W A T C H 184 HOSPITAL MARKETS tion in 1986 to approximately 25 percent in Nineteen HMOs operated in the area in 1994; four-fifths of these were for-profit. 15 All of the HMOs offered an independent practice association (IPA)/network model, and five of the HMOs also offered a staff model. Nine of the HMOs had a Medicare component. A total of 5,755 patients who resided in the study market area underwent CABG surgery in Of 1,823 CABG patients with commercial insurance, 39 percent were in HMOs. Of 3,47 CABG patients with Medicare coverage, 18 percent were in HMOs. About one-third of the patients with commercial insurance and one-third of the Medicare patients resided in each of,, and Palm Beach Counties, with only a few patients residing in Martin County. Among commercially insured patients, 48 percent who lived in County, 39 percent in County, and 31 percent in Palm Beach County were in HMOs. Among Medicare patients, 24 percent who lived in County, 19 percent in County, and 13 percent in Palm Beach County were in HMOs. CABG hospitals. The study market area contained sixteen hospitals that performed CABG surgery, including eight hospitals in County, five in County, and three in Palm Beach County (Exhibit 1). The number of beds in these hospitals ranged from 143 to 1,46, and two of the hospitals were members of the Council of Teaching Hospitals (COTH). Seven of the hospitals were proprietary for-profit hospitals, six were voluntary nonprofit hospitals, two were publicly financed district hospitals, and one was a county hospital. The annual number of CABG operations ranged from 12 to 717 across the hospitals in the study market area (Exhibit 2). Twelve of the sixteen hospitals performed more than 2 CABG operations yearly, the volume below which CABG outcomes worsen appreciably. 16 However, only three of the hospitals performed more than 5 operations per year, a volume associated with further improvement in outcomes. 17 Of the patients in the study area who underwent CABG surgery between 1992 and 1994, 4.4 percent died after the operation. Adjusted mortality rates varied more than fourfold across individual hospitals, from 2. percent to 8.5 percent. Hospitals with higher annual CABG volumes tended to have lower adjusted mortality rates, although the negative correlation between CABG volume and mortality was weak and did not reach statistical significance when all sixteen hospitals were included in the analysis (r = -.41; p =.11). The weak correlation was caused by Hospital 2, an unusual hospital that had both low volume and low mortality (Exhibit 2). Excluding this hospital, the negative correlation between CABG volume and HEALTH AFFAIRS Volume 16, Number 6

5 SEGMENTATION OF HOSPITAL MARKETS EXHIBIT 1 Characteristics Of Sixteen CABG Hospitals In The Southeast Florida Market, 1994 Hospital County Beds , COTH member Yes Yes Ownership Voluntary Proprietary County Voluntary Proprietary Voluntary Voluntary Proprietary District District Voluntary Proprietary Proprietary 14 Palm Beach 425 Voluntary 15 Palm Beach 189 Proprietary 16 Palm Beach 143 Proprietary SOURCE: American Hospital Association Annual Survey of Hospitals, NOTES: CABG is coronary artery bypass graft. COTH is Council of Teaching Hospitals. mortality became significant (r = -.58; p =.2). Of note, the three hospitals with the lowest annual CABG volumes also had the highest adjusted mortality rates (hospitals 3,7, and 8). Average cost per CABG varied twofold across the hospitals in the study market area, from $19,5 to $38,466. Similarly, average length-of-stay varied 1.5-fold, from 9.6 days to 14.3 days. Average cost per CABG and average length-of-stay were uncorrelated, which indicates substantial variation across hospitals in cost per day. Market segmentation. The proportion of CABG patients who were in HMOs differed markedly across the sixteen study hospitals (Exhibit 3). Four hospitals did not perform any CABG operations on patients in commercial HMOs, whereas in four hospitals more than half of the CABG patients with commercial insurance were in HMOs. The HMO share of commercially insured patients in Hospital 2 was 89 percent. Similarly, eight hospitals did not perform any CABG operations on patients in Medicare HMOs, whereas in four hospitals more than one-fourth of the CABG patients with Medicare coverage were in HMOs. The HMO share of Medicare patients in Hospital 1 was 75 percent. Interestingly, the HMO shares of commercially insured and Medicare patients were uncorrelated across hospitals (r =.3; p =.91). The degree of market segmentation also can be described using eight-firm concentration ratios. 18 The eight hospitals with the high- H E A L T H A F F A I R S - N o v e m b e r / D e c e m b e r

6 D A T A W A T C H EXHIBIT 2 CABG Volume, Mortality, And Resource Use For Sixteen CABG Hospitals In The Southeast Florida Market, Hospital County Palm Beach Palm Beach Palm Beach Annual CABG volume a Adjusted CABG mortality a 5.5% Average cost per CABG b $27,354 25,657 38,466 21,886 21,432 2,222 35,255 26,983 2,637 21,26 25,945 24,163 19,5 26,32 25,896 24,741 SOURCE: state hospital discharge data, Florida Agency for Health Care Administration. NOTE: CABG is coronary artery bypass graft. a Based on data. b Based on 1993 data. Average length-ofstay (days) b est HMO shares of commercially insured patients accounted for 89 percent of the patients in commercial HMOs but only 44 percent of the patients with commercial insurance who were not in HMOs. Analogously, the eight hospitals with the highest HMO shares of Medicare patients accounted for all of the Medicare patients who were in HMOs but only 44 percent of the Medicare patients who were not in HMOs. Hospital characteristics and HMOs. Patients in commercial HMOs were divided between teaching and nonteaching hospitals and among voluntary, proprietary, and district hospitals in similar proportions to commercially insured patients who were not in HMOs. In contrast, compared with Medicare patients who were not in HMOs, patients in Medicare HMOs were disproportionately concentrated in teaching hospitals and district hospitals and were underrepresented in proprietary hospitals. To shed light on the dimensions of CABG performance that might attract HMO contracts, we examined the associations between hospital HMO shares and CABG performance measures. Hospital HMO shares were uncorrelated with annual CABG volume, adjusted CABG mortality, or average cost per CABG (Exhibit 4). HEALTH AFFAIRS - Volume 16, Number 6

7 SEGMENTATION OF HOSPITAL MARKETS EXHIBIT 3 Segmentation Among Sixteen CABG Hospitals In The Southeast Florida Market, By Type Of Insurance, Hospital County Palm Beach Palm Beach Palm Beach Commercial Insurance Total CABG cases a Percent HMO 24% Medicare Total CABG cases a SOURCE: state hospital discharge data, Florida Agency for Health Care Administration. NOTES: CABG is coronary artery bypass graft. HMO is health maintenance organization. a Based on 1994 data. Percent HMO 18% However, hospitals with shorter average length-of-stay tended to have higher HMO shares of both commercially insured and Medicare patients. Additional analyses found that patients in commercial HMOs were more likely than commercially insured non-hmo patients to be treated in hospitals with annual CABG volumes lower than 2 (Exhibit 5). Conversely, commercially insured non-hmo patients EXHIBIT 4 Correlation Of Hospital HMO Shares With CABG Volume, Mortality, And Resource Use, Share of commercially insured HMO patients Share of Medicare HMO patients Annual CABG volume Adjusted CABG mortality Average cost per CABG Average length-of-stay -.48* -.47** SOURCE: Authors' calculations. NOTES: CABG is coronary artery bypass graft. HMO is health maintenance organization. *p =.6 **p =.7 H E A L T H A F F A I R S N o v e m b e r / D e c e m b e r

8 D A T A W A T C H were more likely than commerically insured HMO patients to be treated in hospitals with annual CABG volumes between 2 and 499. Similar proportions of commercially insured HMO and non- HMO patients were treated in hospitals with annual CABG volumes of 5 or more. Medicare patients in HMOs were slightly less likely than non- HMO Medicare patients to be treated in hospitals with annual CABG volumes less than 2 (Exhibit 5). However, the main difference between these two groups was that HMO Medicare patients were more likely than non-hmo Medicare patients to be treated in hospitals with annual CABG volumes between 2 and 499, whereas HMO Medicare patients were less likely than non-hmo Medicare patients to be treated in hospitals with annual CABG volumes of 5 or more. 188 HOSPITAL MARKETS Discussion The data presented in this paper show substantial segmentation by type of insurance in the market for CABG surgery in southeast Florida. Commercially insured patients who were not in HMOs and patients in commercial HMOs were distributed differently across CABG hospitals, with some hospitals treating high proportions of HMO patients and other hospitals treating none. Similarly, Medicare patients who were not in HMOs tended to use different hospitals than did patients in Medicare HMOs. The most likely cause of the market segmentation that we observed is selective contracting by HMOs. Certain hospitals in the southeast Florida market offered prices and other contract terms that were attractive to HMOs, while other hospitals in the same market either elected not to deal with HMOs or were unable or unwilling to offer attractive contract terms. 19 The finding that the HMO shares of commercially insured and Medicare patients were EXHIBIT 5 Percentage Of HMO And n-hmo Patients Treated In Hospitals With Different Levels Of Annual CABG Volume Commercial Insurance a Medicare a Annual CABG volume (number of procedures) Fewer than or more HMO b n-hmo b 24% 9% HMO b 2% n-hmo b 7% SOURCE: Authors' calculations. NOTES: HMO is health maintenance organization. CABG is coronary artery bypass graft. a p <.1 for test of equal percentages in HMO and non-hmo patients. b Percentages do not add to 1 because of rounding. HEALTH AFFAIRS - Volume 16, Number 6

9 SEGMENTATION OF HOSPITAL MARKETS uncorrelated across hospitals probably reflects the fact that not all HMOs have a Medicare component and that many HMOs with a Medicare component have separate contracting processes for their commercial and Medicare business. 2 HMO share and hospital quality. The major question raised by the finding of market segmentation pertains to how CABG hospitals that treated high proportions of HMO patients compared with hospitals that treated few HMO patients, especially with regard to quality of care. To address this question, we examined the associations between hospital HMO shares and three proxies for the quality of CABG surgery in individual hospitals: annual CABG volume, adjusted CABG mortality, and teaching status. Although some hospitals with low CABG volumes achieve good results, CABG outcomes generally are better in hospitals that perform many CABG operations each year. Adjusted mortality is commonly used to compare the quality of CABG surgery across hospitals. 21 Lastly, some studies suggest that teaching hospitals provide higher-quality care than nonteaching hospitals provide. 22 We found no evidence that HMOs disproportionately concentrated their CABG patients either in high-volume hospitals or in hospitals with low CABG mortality. In fact, CABG patients in commercial HMOs were much more likely than commercially insured patients who were not in HMOs to be treated in low-volume hospitals. Also, CABG patients in Medicare HMOs were less likely than Medicare patients who were not in HMOs to be treated in highvolume hospitals. Patients in Medicare HMOs were more likely than Medicare patients who were not in HMOs to use teaching hospitals, but the difference was small. In contrast to the findings for the quality proxies, we found that both commercial and Medicare HMOs disproportionately concentrated their CABG patients in hospitals with shorter average lengthof-stay, a readily available measure of resource use. Surprisingly, we found no association between hospital HMO shares and average cost per CABG procedure. Quality versus cost. Economies of scale in information acquisition and processing should, in theory, enable HMOs to identify hospitals that provide high quality of care. However, the findings of this study are consistent with other evidence that, in practice, many HMOs assess hospital quality only informally and rarely use objective data on hospital performance. A recent survey found that whereas nearly all employers consider the level of insurance premiums when choosing managed care plans for their employees, relatively few employers consider quality measures or performance standards. 23 Consequently, many HMOs may operate in market envi- DATAWATCH 189 H E A L T H A F F A I R S - N o v e m b e r / D e c e m b e r

10 D A T A W A T C H 19 HOSPITAL MARKETS ronments where incentives to obtain price discounts from providers outweigh incentives to improve quality. 24 Low-quality hospitals may tend to offer lower prices to HMOs than high-quality hospitals offer. Study limitations. Our study has several limitations. First, our data enabled us to determine annual CABG volumes for individual hospitals but not for individual surgeons, and surgeon volume is an important independent predictor of CABG outcomes. 25 However, only a small fraction of all CABG operations are performed by highvolume surgeons in low-volume hospitals. Second, we had no data on the prices offered by hospitals to HMOs. Therefore, we could not assess the association between price and quality or test the hypothesis that HMOs choose hospitals based mainly on price. Third, proxies for the quality of CABG surgery may be poor indicators of overall hospital quality. But HMOs contract with hospitals for general medical and surgical services, not on the basis of any single procedure. Fourth, our results apply to one market area in southeast Florida; they may not be generalizable to other markets in Florida or to other states. Policy implications. Although our findings are not definitive, our data suggest that HMOs in southeast Florida did not systematically channel their CABG patients to high-quality hospitals. These data underscore the need to hold managed care plans accountable for their hospitals' contracting decisions. One approach that would work for CABG surgery and other tertiary care services is to have plans report volumes and outcomes for the hospitals with which they contract. More generally, linking measures of hospital quality to managed care plans would raise employers' and patients' awareness of plans' responsibilities for monitoring and choosing hospitals based on quality. More research is needed to assess the relationship between quality and patterns of hospital market segmentation by type of insurance. Such research should focus on the quality of the hospitals used by individual patients with different types of insurance. Such research also should examine whether the nature of the relationship between quality and patterns of segmentation differs depending on the level of HMO penetration and the maturity of the managed care market. This research was supported by Grant no. HS9194 from the Agency for Health Care Policy and Research (AHCPR). The paper is based on a presentation at the conference, "Health Care Markets and Managed Care: New Evidence and Emerging Issues, " sponsored by AHCPR and Health Affairs, February 1997, in Washington, D.C HEALTH AFFAIRS - Volume 16-, Number 6

11 SEGMENTATION OF HOSPITAL MARKETS NOTES 1. HMO refers to a health plan that offers comprehensive health care by an established panel of providers to an enrolled population on a prepaid basis. 2. H.S. Luft et al., "The Role of Specialized Clinical Services in Competition among Hospitals," inquiry 23, no. 1 (1986): 83-94; and J.C. Robinson, "Hospital Quality Competition and the Economics of Imperfect Information," The Milbank Quarterly 66, no. 3 (1988): R. Feldman et al., "The Effects of HMOs on the Creation of Competitive Markets for Hospital Services," Journal of Health Economics 9, no. 2 (199): J. Zwanziger and G.A. Melnick, "The Effects of Hospital Competition and the Medicare PPS Program on Hospital Cost Behavior in California," Journal of Health Economics 7, no. 4 (1988): 31-32; G.A. Melnick et al., "The Effects of Market Structure and Bargaining Position on Hospital Prices," Journal of Health Economics 11, no. 3 (1992): ; D. Dranove et al., "Price and Concentration in Hospital Markets: The Switch from Patient-Driven to Payer-Driven Competition," journal of Law and Economics 36, no. 1 (1993): ; J. Zwanziger, G.A. Melnick, and A. Bamezai, "Costs and Price Competition in California Hospitals, ," Health Affairs (Fall 1994): ; and J. Gruber, "The Effect of Competitive Pressure on Charity: Hospital Responses to Price Shopping in California," Journal of Health Economics 13, no. 2 (1994): R. Feldman et al., "Contracts between Hospitals and Health Maintenance Organizations," Health Care Management Review 15, no. 1 (199): 47-6; J.E. Kralewski et al., "Factors Related to the Provision of Hospital Discounts for HMO Inpatients," Health Services Research 27, no. 2 (1992): ; and K.A. Schulman et al., "Quality Assessment in Contracting for Tertiary Care Services DATAWATCH 191 by HMOs: A Case Study of Three Markets," Joint Commission Journal on Quality Improvement 23, no. 2 (1997): Feldman et al., "Contracts between Hospitals and Health Maintenance Organizations;" and Schulman et al., "Quality Assessment in Contracting for Tertiary Care Services by HMOs." 7. E.L. Hannan et al., "Improving the Outcomes of Coronary Artery Bypass Surgery in New York State," Journal of the American Medical Association 271, no. 1 (1994): ; and G.T. O'Connor et al., "A Regional Intervention to Improve Hospital Mortality Associated with Coronary Artery Bypass Graft Surgery," Journal of the American Medical Association 275, no. 11 (1996): H.S. Luft et al., "Should Operations Be Regionalized? The Empirical Relation between Surgical Volume and Mortality," The New England Journal of Medicine 31, no. 25 (1979): ; J.A. Showstack et al., "Association of Volume with Outcome of Coronary Artery Bypass Graft Surgery," Journal of the American Medical Association 257, no. 6 (1987): ; E.L. Hannan et al., "Investigation of the Relationship between Volume and Mortality for Surgical Procedures Performed in New York State Hospitals," Journal of the American Medical Association 262, no. 4 (1989): 53-51; and E.L. Hannan et al., "Coronary Artery Bypass Surgery: The Relationship between Inhospital Mortality Rate and Surgical Volume after Controlling for Clinical Risk Factors," Medical Care 29, no. 11 (1991): The discharge files were public use files obtained from the Florida Agency for Health Care Administration. 1. Commercially insured non-hmo patients include patients with traditional indemnity insurance as well as patients in preferred provider organizations (PPOs). Although both HMOs and PPOs engage in selective contracting, out-of-plan use by PPO members is considerable. PPOs also tend to contract with more providers than HMOs contract with. As a result, PPOs are much HEALTH AFFAIRS - vember/december

12 D A T A W A T C H 192 HOSPITAL MARKETS less likely than HMOs to promote market segmentation. See P. Diehr et al., "Use of a Preferred Provider by Employees of the Preferred Provider," Health Services Research 23, no. 4 (1988): ; N. Shelton, "Competitive Contingencies in Selective Contracting for Hospital Services," Medical Care Review 46, no. 3 (1989): ; K.B. Wells et al., "Mental Health and Selection of Preferred Providers: Experience in Three Employee Groups," Medical Care 29, no. 9 (1991): ; and Marion Merrell Dow, Managed Care Digest: HMO Edition and PPO Edition (Kansas City, Mo.: Marion Merrell Dow, 1993). 11. D.W. Garnick et al., "Appropriate Measures of Hospital Market Areas," Health Services Research 22, no. 1 (1987): We adjusted CABG mortality rates for patients' age, sex, admission source, acute myocardial infarction as the cause of admission, congestive heart failure, coronary angioplasty prior to surgery, use of the internal mammary artery for surgery, and eight chronic comorbidities. The method used to develop the adjusted rates was the standard one in the literature. See, for example, H.S. Luft et al., "Chance, Continuity, and Change in Hospital Mortality Rates," journal of the American Medical Association 27, no. 3 (1993): ; E.L. Hannan et al., "Clinical versus Administrative Data Bases for CABG Surgery: Does It Matter?" Medical Care 3, no. 1 (1992): ; and B. Landon et al., "Judging Hospitals by Severity-Adjusted Mortality Rates: The Case of CABG Surgery," Inquiry 33, no. 2 (1996): Based on the 1997 adjusted average per capita costs (AAPCCs) for,, and Palm Beach counties and the 1997 U.S. per capita cost (USPCC), published by the Health Care Financing Administration. 14. Area Resource File, Office of Data Analysis and Management, Bureau of Health Professions. 15. Group Health Association of America, 1995 National Directory of HMOs (Washington: GHAA, June 1995). 16. Luft et al., "Should Operations Be Regionalized?;" Showstack et al., "Association of Volume with Outcome of Coronary Artery Bypass Graft Surgery;" and Hannan et al., "Coronary Artery Bypass Surgery." 17 K. Grumbach et al., "Regionalization of Cardiac Surgery in the United States and Canada," journal of the American Medical Association 274, no. 16 (1995): The eight-firm concentration ratio is a standard measure used in industrial organization to summarize the distribution of market shares among firms. See, for example, J. Tirole, The Theory of Industrial Organization (Cambridge, Mass.: The MIT Press, 1988), Schulman et al., "Quality Assessment in Contracting for Tertiary Care Services." 2. GHAA, 1995 National Directory of HMOs. 21. Luft et al., "Chance, Continuity, and Change in Hospital Mortality Rates;" Hannan et al., "Clinical versus Administrative Data Bases for CABG Surgery;" and Landon et al., "Judging Hospitals by Severity-Adjusted Mortality Rates." 22. A.J. Hartz et al., "Hospital Characteristics and Mortality Rates," The New England journal of Medicine 321, no. 25 (1989): ; and E.B. Keeler et al., "Hospital Characteristics and Quality of Care," journal of the American Medical Association 268, no. 13 (1992): Reuters Medical News, "Small Firms More Concerned about Cost of Health Benefits," 4 March D.J. Lipson and J.M. De Sa, "Impact of Purchasing Strategies on Local Health Care Systems," Health Affairs (Summer 1996): Hannan et al., "Coronary Artery Bypass Surgery;" and Hannan et al., "Investigation of the Relationship between Volume and Mortality." HEALTH AFFAIRS - Volume 16, Number 6