Taking Care of Business: HMOs That Spend More on Administration Deliver Lower-Quality Care

Abstract

The authors analyzed health maintenance organizations' administrative costs and quality measures from the National Committee for Quality Assurance's Quality Compass database for the years 1997–2000. HMOs with higher administrative overhead had consistently worse quality scores in univariate analysis. Multivariate analyses controlling for geographic region (all years) and HMO model type (1997 and 1998 analyses only) confirmed that higher administrative costs were associated with lower quality. Excess HMO bureaucracy is not only wasteful but harmful.