Selective Contracting for Tertiary Care Services by Managed Care Plans

Vol. III, No. 1
February 2, 1999

A team of researchers led by Jack Hadley, Ph.D., of Georgetown Institute for Health Care Policy and Research (IHCPR), and including Darrell Gaskin, Ph.D., also of the IHCPR, Kevin Schulman, M.D., of the Georgetown University Medical Center, and Jose Escarce, M.D., Ph.D., of RAND, have examined the processes employed by MCOs during contract negotiations with tertiary care hospitals. The researchers discovered that as the amount of managed care and/or hospital competition in a metropolitan statistical area increases, the importance of the price of services as a factor in the selection of providers also increases relative to the importance of the quality of services. The researchers concluded that while the actual contracting processes vary widely across markets, in general, the price of a service matters more in highly competitive markets, and the quality of the service is relatively less important.