HMO profits to reverse current downward slide
After two years of declining revenues, HMO profits should rebound in 1997 as the industry attempts its first significant price increase since 1994, according to a forecast issued by Corporate Research Group of New Rochelle, NY. The report predicts HMO revenues will grow nearly 15% this year, compared to a 10% decline in 1996 and a 20% drop in 1995.
The report, "The Outlook for Managed Care," projects enrollment growth slightly below the 14% achieved in 1996. Medicare risk HMOs offer the greatest potential for membership growth.
States offering the best potential for HMO growth include Texas, Florida, Pennsylvania, Ohio, North Carolina, Missouri and Virginia, according to the report.
In the meantime, some physician practices with capitation contracts may see declining per-member per-month (PMPM) rates until profits rebound, according to a Milliman & Robertson study of nearly 500 HMOs nationwide. Flat or decreasing premium rates and competitive managed care markets mean that many physicians will feel pressured to do more with less.
A concrete example of how PMPM reimbursement rates have declined can be seen in California. Average PMPM rates employers paid to HMOs fell 0.09% in 1995.
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