The use of medical services under prepaid and fee-for-service group practice

Abstract

This study compares medical care use under two prepaid plans offered to the same group of employees and their families. One is a Kaiser plan under which all care is provided on a prepaid basis by a closed panel group practice, and hospital care is provided in hospitals owned by the Kaiser system. Thus physicians are at risk for the entire costs of the covered services of their enrollees. Under the other plan. Clinic plan for short, physician services and outpatient ancillary services are provided by a large, predominantly fee-for-service group practice while hospital care is covered by a Blue Cross policy incorporated into the plan. Thus physicians under this plan are not at risk for the hospital costs of their enrollees and, since prepaid patients are such a small percentage of their total patient populations and they usually do not know if a patient is prepaid or fee-for-service, they are unlikely to treat their prepaid patients differently from their fee-for-service patients.

Our findings show that with minor exceptions, the pattern of medical care use under the two forms of group practice is strikingly similar. (1) The rate of ambulatory care is much the same, averaging 2.97 physician visits per year for Kaiser members and 3.05 for Clinic members. (2) There is no significant difference in the rates of patient-initiated visits and physician-initiated visits, either in terms of visits per plan member or per episode of illness. (3) Most important, hospital use under the two plans is practically identical. The age-sex adjusted number of hospital days per 1000 personyears is 249.8 for Kaiser members and 250.7 for Clinic members. These rates are low not only compared to the national rates and rates under alternative insurance plans but also compared to some other prepaid group practice plans. The few differences which do exist are minor. Clinic members are somewhat heavier users of preventive services and of some outpatient ancillary services, notably laboratory tests used in preventive care and to a lesser degree. X-rays. But the overall picture which emerges is one of great similarity between the patterns of use under the two plans.

We hypothesized that the conservative use of hospital as well as of ancillary and of physician-initiated services under fee-for-service group practice is due largely to the control over the supply of physicians exercised by the group, which is unlikely to add physicians unless all its members are fully occupied.