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Evaluating Health Planning: Empirical Evidence on HSA Regulation of Prepaid Group Practices

The regulation of HMOs by health planning agencies serves as a "tracer" to aid in evaluating HSAs, and as a source of empirical evidence for the heretofore largely theoretical health policy debate between market reformers and regulators. Two complementary studies (the authors' 1979 survey investigating the hospitalization policies of prepaid group practices, and AMPI's study of all HMO applications submitted to HSAs from 1975 through mid-1978) provide information about the extent of HMO applications to planning agencies, the rate of rejections, the burden of the planning process on HMOs, and the possibility that negative perceptions of regulation may have led HMOs to refrain from activities requiring planning approval. Both studies reveal that health planning review was detrimental to 20 to 30 percent of HMOs. Thus data collected during the period of extensive HSA regulation of HMOs seem to justify the current policy that gives HSAs only very limited authority over HMOs.