The relative effectiveness of managed care penetration and the healthcare safety net in reducing avoidable hospitalizations.

Avoidable hospitalizations represent a key indicator for access to, and the quality of, primary care. Therefore, understanding their behavior is essential in terms of management of healthcare resources and costs. This analysis examines the affect of 2 healthcare strategies on the rate of avoidable hospitalization, managed care and the healthcare safety net. The avoidable hospitalizations definition developed by Weissman et al. (1992) was used to identify relevant inpatient episodes. A 2-stage simultaneous equations multivariate regression model with instrumental variables was used to estimate the relative influence of HMO penetration and the composition of local hospital markets on the rate of avoidable hospitalizations. Control variables in the model include healthcare supply and demand, demographic, socioeconomic, and health status characteristics. Increased market presence of public hospitals significantly reduced avoidable hospitalizations. HMO penetration did not influence the rate of avoidable hospitalizations. The results suggest that public investments in healthcare facilities and infrastructure are more effective in reducing avoidable hospitalizations.