HMOs: New York Times Looks Ahead, Behind
Two articles in this week's New York Times look at the rocky road behind HMOs and managed care's prospects for the future. Sunday's piece notes that the "majority of HMOs lost money in 1997," and reports that the losses cast doubt on hopes that "managed care, left to the forces of the free market, would, within a few years, distribute resources evenly and keep costs down." Securities Data Company reports that the number of health care service companies going public "dwindled last year to the lowest level in a decade." Dr. Arnold Relman, former editor of the New England Journal of Medicine, said, "If I were a Wall Street analyst, I would have a no-buy recommendation on them all." The Times reports, "While [HMOs] prospered by taking advantage of easy one-time savings, like the use of their clout to get doctors and hospitals to accept less to provide care, their fat profits could prove ephemeral in the face of medical costs that they, too, cannot control." Diane Archer, head of the Medicare Rights Center, said, "Unless you have a health care system designed to encourage health plans to treat the sick, and not compete purely on cost, there will be no winners" (Abelson, 1/3).
Bleak (But Better) New Year?
Writing in today's Times, Milt Freudenheim predicts intensified merger mania for the health care industry in 1999, and speculates that looming patient protection laws and Y2K glitches will pressure HMOs' bottom lines. Despite record premium increases, "1999 is unlikely to be a stellar year," said Arun Kumar, a director at Standard & Poor's. Dr. Peter Kongstvedt, a partner in Ernst & Young's Washington office, said, "Some recognizable players won't be here in a year -- they will be absorbed by other companies." He added that new federal laws requiring HMOs to use computers to track the quality of care provided to Medicare patients may strain information systems and strain efforts to resolve Y2K problems. Patients' rights legislation, which health care industry officials contend will raise costs, may add "yet another big uncertainty" in the coming year (Freudenheim, 1/4).