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InterStudy offers 'index of competition'

Often at professional meetings, the first thing networking practice managers want to know is not only if a particular colleague or practice is doing well financially, but also what competition that person or practice has to deal with.

Depending on a manager's personality, some thrive in a hotbed of competition and some prefer a less-stressful work environment.

Here's something that can help: InterStudy has devised a quantitative measure for market competition, called the index of competition (IOC), says Tammy Lauer, lead researcher for the Minneapolis-based managed care research firm. InterStudy's IOC is based on another index called the Herfindahl index, which is the squared sum of the HMO market shares of all HMOs operating in a given metropolitan market. The IOC equals one minus the Herfindahl Index. IOC values can range from zero (which would be a monopoly, or the least competitive) to one (which is the highest possible level of competition among many HMOs with similar market shares). As more HMOs enter a particular market, the IOC increases.

Interestingly, the 10 most competitive large markets aren't all in California, as one might guess. The most competitive large market is Kansas City, MO, with Charlotte, NC, coming in second and Tampa, FL, coming in third. InterStudy says that Denver reflects the most competitive of medium-sized markets, with an IOC of 0.828.

Or perhaps you have an interst in high-growth HMO areas — either as ones where you want to jump into the action, or as areas you want to avoid. The table on the bottom of page 121 shows cities where the largest HMO enrollment growth is taking place — two in California, two in Florida, and one in Pittsburgh. These five MSAs account for 73% of the net enrollment in HMO growth in the past year.

Another subtle measure of market competition and/or intensity is reflected in the inpatient per 1,000 population benchmarks established in a particular market. The table on the top of page 121 shows InterStudy's benchmarks for large, medium, and small markets across commercial, Medicare, and Medicaid payers. Unexpectedly, the smaller commercial markets have a tighter mean ratio (219) than the large markets in that category (224). As you would expect, Medicare's ratios are much larger.