HMOs’ float squeezes hospitals
When an HMO doesn’t pay its hospital bills, the cost of doing business goes up, and sometimes employee paychecks are delayed. Several larger HMOs among them, Oxford Health Plans, United Healthcare, and Humana were behind at the end of last year in their payments to hospitals, physicians, and patients. Oxford was 94 days late to providers, United was 77 days late, and Humana was 71 days late. The three companies had a total of $3.23 billion in accounts payable on Dec. 31. The lags are blamed on paperwork.
Intentional or not, the effect of payment delays contributes substantially to an HMO’s bottom line. United Healthcare, according to an April 17, 1997, article in The New York Times, reported 1996 investment and other income of 35% of its pretax profits, up from 25% in 1994. The company’s president said the company did not make the money off the float, but from reserves required by state regulators to cover newly acquired insurance customers. Oxford Health Plans could make in excess of $400,000 a day in interest on a floated $1 billion. The company CEO said he expects Oxford eventually to cut delay time down to 14 days. t
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