Research on Determinants of Hospital Contracts with HMOs

What characteristics determine hospitals’ ability to contract with managed care organizations (MCOs)? Researchers at Boston University studied how hospitals in different markets in Florida compete for MCO contracts, how different factors affect hospital consolidation and competition over time, and how competition for MCO business affects hospital revenues. As MCOs become an increasingly important source of hospital revenue, hospitals unable to secure MCO contracts are often left in a weak position requiring them to merge or consolidate with other organizations in order to survive. An analysis of the determinants of hospital contracting may give policymakers information that can be used to predict future hospital consolidation trends in different types of markets, and to predict the types of hospitals that may not survive. The objective of the study was to explore in depth why and how hospitals contract with managed care organizations, and possible effects of contracting with MCOs on hospitals’ ability to remain independent entities.