Inpatient hospital utilization in three prepaid comprehensive health care plans compared with a regular Blue Cross plan.

The evidence is substantial that comprehensive, HMO-type prepayment plans can significiantly reduce hospitalization rates. Yet it remains unclear which factors contribute to this phenomenon. This study focuses on organizational characteristics of four plans with different hospitalization experiences. Regular medical staff review and frequent use of second opinions and economies of scale achieved by providing care at one well-equipped, large health center appear to have the largest impact. However, such organizational advantages can easily be wiped out by adverse self-selection of patients during open-enrollment periods. Evidence of selection based on predictable high obstetrical and newborn care costs is presented.