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BACKGROUND: The theory of managed competition holds that the quality and economy of health care delivery will improve if independent provider groups compete for consumers. In sparsely populated areas where relatively few providers are required, however, it is not feasible to divide the provider community into competing groups. We examined the demographic features of health markets in the United States to see what proportion of the population lives in areas that might successfully support managed competition. METHODS: The ratios of physicians to enrollees in large staff-model health maintenance organizations were determined as an indicator of the staffing needs of an efficient health plan. These ratios were used to estimate the populations necessary to support health organizations with various ranges of specialty services. Metropolitan areas with populations large enough to support managed competition were identified. RESULTS: We estimated that a health care services market with a population of 1.2 million could support three fully independent plans. A population of 360,000 could support three plans that independently provided most acute care hospital services, but the plans would need to share hospital facilities and contract for tertiary services. A population of 180,000 could support three plans that provided primary care and many basic specialty services but that shared inpatient cardiology and urology services. Health markets with populations greater than 180,000 would include 71 percent of the U.S. population; those with populations greater than 360,000, 63 percent; and those with populations greater than 1.2 million, 42 percent. CONCLUSIONS: Reform of the U.S. health care system through expansion of managed competition is feasible in medium-sized or large metropolitan areas. Smaller metropolitan areas and rural areas would require alternative forms of organization and regulation of health care providers in order to improve quality and economy.
Kronick et al. (Thu,) studied this question.