Clinton Administration Awards 10 Research Grants to Study Changes in Health Care Markets

Press Release Date: November 13, 1995

The Agency for Health Care Policy and Research today announced the award of 10 research grants to study changes that are now re-shaping America's health care system as a result of complex market forces. The grants totaled $1.4 million for the first year. Most of the projects will be completed in two years or less.

"We are delighted by the exceptionally high quality of the research proposals we have received for in-depth study of health care market forces," said AHCPR Administrator Clifton R. Gaus, Sc.D. "The proposals selected for funding represent our sense of priorities for responding to essential information needs."

Dr. Gaus said the delivery of health care services in the United States is now undergoing dramatic transformation. Changes include, for example, mergers and consolidation of health care organizations; a move toward greater collective purchasing of health care and health insurance; and innovations that are brought about by single large employers—providers of employee health benefits—who are seeking more value for their healthcare dollar.

"The growth of managed care organizations and a decline in the number of independent hospitals and physician groups are among the most obvious changes that have occurred in response to market forces," Dr. Gaus said.

There is currently limited information about the types of market structures and organizations that are emerging in the health care sector. Even less is known about how these structures are influencing the competitive strategies of health providers and insurers, the quality and types of care available in the market, or the price and equitable distribution of services.

Some key research questions to be addressed by the grantees include: How has HMO market structure influenced formation of provider networks? What have been the effects on costs and premiums? How do rural providers perceive and respond to market changes? Do hospital mergers reduce costs? Are savings passed on to consumers as lower prices? Are savings retained by hospitals as higher profits?

"Answers to these and other research questions are needed as a basis for discussion by all participants in the health care system—in both the public and private sectors," Dr. Gaus said. "Research will provide purchasers and providers of health care with an evidence-based understanding of what structural and behavioral changes are taking place in health care markets, how and why these changes are occurring, and their implications."

Following is a list of recipients and amounts of awards for new AHCPR grants for research on topics related to "market forces in a changing health care system":

• Georgetown University, Washington, D.C., "Effects of managed care on physicians and their practices": $183,000.
• University of Alabama, Birmingham, "Effects of managed care on hospital and physician integration": $160,000.
• University of Pennsylvania, Philadelphia, "Impact of HMOs on integrated networks and services": $139,000.
• University of Illinois, at Chicago, "Impact of managed care on physician markets": $150,000.
• University of Nebraska Medical Center, Omaha, "Impact of changing markets on rural health care providers": $108,000.
• University of Pennsylvania, Philadelphia, "Efficiency in hospitals: Do HMOs and Preferred Provider Organizations 'buy right'"?: $185,000.
• University of Minnesota, Minneapolis, "Effects of horizontal hospital mergers on efficiency, profitability and consumer prices": $128,000.
• RAND, Santa Monica, Calif., "Health care markets, managed care, and hospital performance": $195,000.
• Carnegie Mellon University, Pittsburgh, Pa., "Determinants of HMO efficiency from 1985 to 1994": $88,000.
• Virginia Commonwealth University, Richmond, "Performance of strategic hospital collectives": $140,000.

The studies of health care markets funded by AHCPR complement studies of changes in health care financing and organization sponsored by the Robert Wood Johnson Foundation (RWJ), a national philanthropy devoted to health care. Efforts were made to coordinate the research portfolios of AHCPR and RWJ to avoid project duplication.

Note to Editors: Descriptions of individual research projects are available upon request.

For additional information, contact AHCPR Public Affairs: Karen Migdail, (301) 427-1855.