A Controlled Trial of the Effect of a Prepaid Group Practice on the Utilization of Medical Services

Published in: The New England Journal of Medicine, v. 310, no. 23, June 7, 1984, p. 1505-1510

Posted on RAND.org on June 01, 1984

by Willard G. Manning, Arleen Leibowitz, George A. Goldberg, William H. Rogers, Joseph P. Newhouse

Does a prepaid group practice deliver less care than the fee-for-service system when both serve comparable populations with comparable benefits? To answer this question, the authors randomly assigned a group of 1580 persons to receive care free of charge from either a fee-for-service physician of their choice (431 persons) or the Group Health Cooperative of Puget Sound (1149 persons). In addition, 733 prior enrollees of the Cooperative were studied as a control group. The rate of hospital admissions in both groups at the Cooperative was about 40 per cent less than in the fee-for-service group (P less than 0.01), although ambulatory-visit rates were similar. The calculated expenditure rate for all services was about 25 per cent less in the two Cooperative groups (P less than 0.01 for the experimental group, P less than 0.05 for the control group). The number of preventive visits was higher in the prepaid groups, but this difference does not explain the reduced hospitalization. The similarity of use between the two prepaid groups suggests that the mix of health risks at the Cooperative was similar to that in the fee-for-service system. The lower rate of use that the authors observed, along with comparable reductions found in non-controlled studies by others, suggests that the style of medicine at prepaid group practices is markedly less hospital-intensive and, consequently, less expensive.

This report is part of the RAND Corporation External publication series. Many RAND studies are published in peer-reviewed scholarly journals, as chapters in commercial books, or as documents published by other organizations.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.