News and Commentary

HMO profit margins still dropping, but not so quickly


On the whole, declines in HMO profitability have skidded to a near halt. Through the first nine months of 1997, the median HMO profit margin dropped slightly from 1996, but not anywhere near the dramatic losses posted in the previous two years, according to InterStudy Publications, which monitors HMO trends. In fact, half of all HMOs' bottom lines improved in 1997 from 1996. InterStudy credits the relatively low growth rate of medical expenses, health plans' efforts to tackle administrative costs and the profitability of Medicare risk arrangements for the turnaround.

SOURCE: INTERSTUDY PUBLICATIONS, ST. PAUL, MINN., 1998

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