The organizational determinants of HMO participation in Medicaid managed care.

Abstract

Medicaid managed care grew dramatically during the 1990s. Forty-four states used Medicaid managed care and covered 13,330,119 lives in 1996. States turned to managed care strategies to control costs, increase access to providers, and improve the quality of patient care. Not all HMOs embraced Medicaid, less than half signed contracts with state Medicaid agencies in 1995. Resource Dependency Theory proposes that HMOs will act to reduce unacceptable dependence on buyers (employers) and suppliers (providers) for critical resources. The purpose of this research is to assess the extent to which HMOs incorporated the decision to participate in Medicaid into their strategies in order to overcome excessive reliance on specific buyers and suppliers. The hypothesis is that HMOs acting to alleviate unacceptable levels of resource dependence were associated with the Medicaid managed care business. The analysis used a national cross section data set. The data set included information from several sources with information on 468 HMOs, 271 markets, and 30 states in 1995. The regression models produced mixed results for the hypothesized resource dependency relationships; HMOs participated in Medicaid based on their dependency on a limited number of customers (employers) or suppliers (providers). HMOs may have responded to problematic dependency relationships by expanding into new markets or developing new products but Medicaid does not appear to be a preferred component of their strategy. HMOs may have turned to Medicaid managed care, and the increased enrollment it brings, to achieve strategic goals with its hospital suppliers. HMO competition was also associated with greater Medicaid participation. The analysis used other variables to control for the effects of HMO and market characteristics and state policies. In summary, although results are heterogeneous, many of the associations among HMO characteristics, market characteristics, and Medicaid managed care participation predicted by Resource Dependency Theory were identified in this study. The relative importance of Resource Dependency Theory should be pursued through further work, especially a survey of HMO leaders to identify explicit strategies that influence participation in Medicaid managed care. (Abstract shortened by UMI.)