HMOs now cover nearly 30% of insured Americans
Managed care penetration in health care has continued to increase dramatically, with nearly 10 million more Americans enrolled in HMO plans in 1996 as compared to 1995, a new study shows.
In 1996, the number of licensed operating HMOs increased 12% to 749, marking the third consecutive year of growth. Enrollment in HMOs rose to $77.3 million, a 14.4% increase over 1995, according to the Managed Care Digest Series of 1997’s HMO-PPO/Medicare-Medicaid Digest. The series is sponsored by Hoechst Marion Roussel in Kansas City, MO, and the data is provided by SMG Marketing Group Inc. in Chicago.
The Pacific region had the highest HMO penetration with 42.2%, and the lowest penetration was in the South Central region with 16.5%, the report showed. HMOs are almost nonexistent in Mississippi, which has a 1.8% penetration, whereas the penetration is highest in Delaware with 59.4%.
South Central states still have high percentages of fee-for-service health care, so those states also have few integrated delivery systems, another trend that is tracked by the Hoechst Marion Roussel digest series.
"As the reimbursement rates get lower, it forces health care systems and communities to reduce their costs, and one of the ways they do that is through integration," says Randy Killian, MBA, MS, executive vice president for the National Association of Managed Care Physicians and the American Association of Integrated Healthcare Delivery Systems in Glen Allen, VA.
The Hoechst Marion Roussel study reported a dramatic increase in the number of HMOs that were part of integrated health systems in 1996. These climbed 58.9% to 178, compared with 112 in 1995. These HMOs accounted for 23.8% of all licensed HMOs.
The HMO/PPO report’s key findings were as follows:
• 32% of HMOs were younger than five years in 1996; this compares with 13.5% younger than five years in 1994.
• The Independent Practice Associations (IPA) model of HMOs accounted for 67% of all operating HMOs in 1996, with 502 plans. The IPA model is one in which physicians participate in a prepaid health care plan and charge agreed-upon rates to enrolled patients and bill the IPA on a discounted fee-for-service or capitated basis.
• The staff-model HMO held a 6.1% share of the HMO market with 46 plans. This type consists of a group of physicians who are either salaried employees of a specially formed professional group practice that is part of the HMO plan or they are salaried employees of the HMO.
• Group-model plans hold 12.8% of the market with 96 plans. These types include the closed panel plan in which medical services are provided by physicians who are separate but serve only the HMO and use an HMO-owned health center or satellite clinic, or the plan in which the HMO contracts with an existing independent group of physicians.
• Network-model HMOs accounted for 14% with 105 HMOs in 1996. In this type, the HMO contracts for medical services with a network of medical groups.
• Although HMO enrollment has steadily increased over the past 10 years, the number of HMOs had fallen each year from 1987 to 1993 and has risen each year since then.
• Large HMOs, plans with 250,000-plus members, used capitation in 1996 when reimbursing 85.2% of the contracts with primary care physicians; 60.2% of contracts with specialists, and 30.3% of contracts with hospitals.
• HMOs enrolled about 4 million Medicare beneficiaries in risk plans in 1996, a 45.4% increase from 1995.
• The overall average number of hospital days per 1,000 non-Medicare members enrolled in HMOs fell in 1996 to 256.8 from 258.4 in 1995.
• Three categories showed an increase in average utilization rates for Medicare beneficiaries enrolled in HMOs in 1996. These were as follows:
hospital days per 1,000 Medicare members;
ambulatory visits per Medicare member;
hospital admissions per 1,000 Medicare members.
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