News and Commentary

Financial Stability Of HMOs Called A Mixed Bag

An HCIA-Sachs survey says the median HMO profit margin in 1998 was –1.7 percent, slightly better than in 1997. Forty-one percent of HMOs made money in 1998.

Some marquee organizations are rebounding. Not-for-profit Kaiser Permanente ended 1999 with a net loss of $6 million, far from its $288 million net loss in 1998. On the for-profit side, Foundation Health's net income in 1999 was $142 million, compared with a net $165 million loss the previous year.

Many others, however, are still struggling. Aetna Inc. said it would split into separate "health and wealth" businesses — evoking memories of days before Aetna's corporate culture smothered U.S. Healthcare's inventiveness, say some observers. Aetna spurned a purchase offer from WellPoint Health Networks, opting instead for the restructuring plan.

In Massachusetts, Harvard Pilgrim Health Care will continue as a not-for-profit entity, after state officials restructured its debt and agreed its business plan was solid enough to get it into the black by next year. Some large for-profit plans that had considered buying Harvard Pilgrim subsequently expressed concern about entering Massachusetts, where opposition to for-profit care is strong.

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