MERGERS: ‘Unhealthy for HMOs,’ Op-Ed Writer Contends
An op-ed in today's Wall Street Journal argues that the "mega-HMO model," produced by ongoing consolidation in the managed care industry, "has failed because of its own contradictions." Writer J.D. Kleinke writes, "Improving medical care for millions of patients requires innovation, expansive thinking and risk taking -- in short, a vision. ... As HMOs consolidate into an industry structure that resembles the behemoth indemnity insurers of a generation ago, they are forced to devote more energy to simple execution: the collection of premiums and payment of claims. This is the health-insurance system we grew up with. It works fine when that's all there is to the business, but things get complicated when the same behemoths purport to manage care." According to Kleinke, once the wave of HMO mergers comes to an end, the remaining giants may "finally recognize (or at least finally admit) managed care's central paradox: Managing a population's overall health often conflicts with the quarterly financial imperatives of a large, publicly traded corporation -- and always conflicts with the culture of execution-oriented business. And so they forestall the inevitable; they merge to sustain their growth rates and margins and focus on execution."
Too Much To Handle?
Kleinke notes that managed care has brought about important changes in how health care is delivered, particularly in developing "end-of-life case management systems." He writes, "The correction of key flaws in the care process is the real value added of managed care. But developing and marketing it appropriately may prove too organizationally complex for the typical HMO. If so, HMOs may consider spinning off some of these functions in a wave of industry deconstruction that inevitably follows a wave of industry consolidation." Kleinke's op-ed is based on his forthcoming book, "Bleeding Edge: The Business of Health Care in the New Century" (8/17).