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

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

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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 either from a fee-for-service physician of their choice (431 persons) or at the Group Health Cooperative (GHC) of Puget Sound (1149 persons). Another 733 persons who shared in the cost of their fee-for-service care, but were otherwise comparable to the first two groups, were studied to observe the effects of cost sharing. The rate of hospital admissions for both groups at GHC was about 40 percent less than in the free-care fee-for-service group (p < 0.01), although ambulatory visit rates were similar. The calculated expenditure rate for all services was about 25 percent less in the two GHC groups when compared with the free-care fee-for-service group (p < 0.01 for the experimental group, p < 0.05 for the control group). Preventive visits were higher in the prepaid groups, but cannot explain the reduced hospitalization. The similarity of utilization between the two prepaid groups implies that the mix of health risks at GHC was similar to that in the fee-for-service system. The lower rate of use observed at GHC, along with comparable reductions found in noncontrolled studies by others, suggests that the style of medicine at prepaid group practices is markedly less hospital intensive and consequently less expensive.

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