MANAGED CARE PENETRATION IN RURAL SETTINGS

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Description: There is substantially less penetration by managed care into rural areas, especially if one goes beyond the rural areas that ring SMSAs; see the table on page 239. Much of the effectiveness and appeal of managed care in urban settings has been the ability to negotiate lower fees. But such bargaining assumes that the plan can go to an alternative set of providers. Rural areas lack the kind of density of providers, esp. hospitals, that make such bargaining successful. The study will take advantage of the updating of the physician location analysis of several years ago to build data for states in the northern plains and Rocky Mountain west, as well as the Pacific Northwest, upper Mid-West, Tennessee, and Ohio. For each type of provider, they can estimate the distance to the nearest provider of that type. Then use MEPS files to examine the effect of distance on utilization and expenditures using standard multipart models. Thresholds for not traveling to a more distant provider over a closer one will be determined. Herfindahl indices can be calculated on the basis of zip code level information, and aggregated for the zips served by each physician. They will also examine the penetration rate as a function of local market concentration of providers, AAPCC and other factors. Since market penetration is strongly related to market size, and size is related to both the structure of competition and the kinds of providers available, they will try to separate the two effects.