Explaining hospital inpatient utilization differences between traditional Medicare and Medicare HMO patients

This study explores the differences between Medicare HMO and traditional Medicare inpatient hospital service utilization (as measured by charges) within the State of Florida, using nine high-volume DRGs. The analyses controlled for differences due to severity, diagnosis, mortality, patient age, race, year, hospital size, and metropolitan area (as measured by the average adjusted per capita cost for a Medicare beneficiary). Nine high-volume DRGs were analyzed. After controlling for covariates, the Medicare HMO patients were found to have statistically significant higher mean ancillary and other facility charges for two high-volume chronic illness DRGs when compared to traditional Medicare patients. Higher mean charges are a result of more expensive services being performed and/or more services being performed. In contrast, none of the acute diagnoses showed statistical significance between the two payer groups. Medicare HMO patients had statistically significant higher ancillary service utilization (as measured by charges) in Pharmacy, Laboratory, Diagnostic Radiology, and Emergency Room for all of the chronic illnesses. In two of the high-volume chronic DRGs, Medicare HMO patients showed higher utilization of Intensive Care Unit services. In both of the high-volume chronic cardiac DRGs, Medicare HMO patients showed higher utilization of Respiratory Therapy. Analysis of the number of secondary diagnoses for Medicare HMO patients versus traditional Medicare patients showed Medicare HMOs did not have a higher percentage of patients with multiple secondary diagnoses. The results of this research suggest that different clinical production processes may exist between Medicare HMO patients and traditional Medicare patients. Medicare HMO patients are using expensive and/or more Pharmacy, Laboratory, Diagnostic Radiology, and Emergency Room services than traditional Medicare patients. The higher Emergency Room service utilization may suggest a different process exists for Medicare HMO patients to gain hospital admittance. Additionally, the higher Intensive Care Utilization for two of the DRGs suggests Medicare HMO patients are using more of this service. These results are important because it is generally believed that traditional Medicare and Medicare HMO patients have similar clinical production processes, and that Medicare HMOs have lower charges for inpatient care, ceteris paribus, than traditional Medicare. That belief was not supported by this study. This analysis provides statistical evidence that Medicare HMO patients have higher inpatient hospital ancillary and other facility charges when compared to traditional Medicare patients for certain chronic-care DRGs. Furthermore, these results suggest a difference in the clinical production process between Medicare HMO patients and traditional Medicare patients. Additional research is needed to determine if these differences are due to inherent patient population differences and/or what effect they are having on patient outcomes.