Blue cross market share, economies of scale, and cost containment efforts

This paper examines two components of the hospital insurance market structure - market share and the absolute number of enrollees in Blue Cross plans - to ascertain whether market structure affects the willingness of Blue Cross plans to use cost control measures. Empirical estimates show that larger plans are more likely to use prospective reimbursement, pre-admission testing, and concurrent review. Market share, however, has a positive effect only on concurrent review. We suggest that there are economies of scale to cost control efforts, but that high market share generally does not lead to increased cost-consciousness.