Provider-owned health plans: El Dorado or Armageddon?

The development of provider-owned health plans continues to be an important strategy of integrated delivery systems (IDSs). While HMO enrollment growth has continued, reaching almost 70 million people, average health plan profit margins have declined from 8 percent in 1994 to less than 1 percent in 1997. About 56 percent of HMOs lost money in 1998. The ability to successfully develop and operate a provider-owned HMO is affected by conditions inherent to the managed care industry, the level of cooperation among IDS business, units, and local market conditions.