Who is benefiting from the move to managed care?
So far, it's not patients, who increasingly find their choices restricted by network policies that funnel them to predetermined medical team members.
It's not employers, who see HMOs using their huge cash reservoirs to fund mergers rather than dramatically pare premiums, fund expanded wellness and prevention programs or accelerate meaningful outcomes measurement systems.
Nor is it healthcare providers, who continue to face demands to squeeze every penny possible out of their charges to managed-care plans.
First-quarter earnings reports, which are beginning to hit investors' desks, and the business press indicate that many HMOs are awash in cash. The merger of Woodland Hills, Calif.-based WellPoint Health Networks and Health Systems International is valued at $4.8 billion, and executives of the giant managed-care firm are foreshadowing an extensive national expansion effort.
When a mega-HMO gobbles up smaller health plans, it has the potential to benefit the market. But it usually ends up reducing the HMO's per-capita administrative costs and curtailing local competition.
While they were putting pressure on providers to cut costs, the nation's big for-profit HMOs were rewarding their chief executives with sizable pay packages. A new study by Graef Crystal, an executive compensation expert at the University of California at Berkeley, showed the cash and stock awards to the chiefs of the seven biggest for-profit HMOs averaged $7 million in 1994.
Publicly traded HMOs are accountable to their shareholders, and it's legitimate to reward executives for strong performance. But a fat compensation package is unseemly in a time of perceived spending restraint.
In addition, it spurs a backlash against too much concentration in the hands of giant health plans. In Minneapolis and other mature managed-care markets, employers are discussing direct negotiations with providers that have the potential to squeeze out the HMO middleman.
Managed-care organizations that want to be prepared to meet the healthcare challenges of the future must do a better job of proving to patients, providers and employers that they add real value to the medical-care delivery system.