What determines hospital sponsorship of an HMO?

Using a strategic adaptation framework, this study evaluates the underlying institutional, market, organizational, and financial factors leading to hospital sponsorship of a health maintenance organization (HMO) insurance product. Analyzing hospitals in Metropolitan Statistical Areas (MSAs) in 1995 and 1996, the study found that a hospital is more likely to sponsor an HMO in markets that see a combined interaction effect of a large number of competing HMOs and high HMO penetration. HMO sponsorship also is more likely among hospitals with relatively low market share. Only in small MSA markets do hospitals with greater liquidity sponsor an HMO. Finally, hospitals that are affiliated with a multihospital system and under public ownership are more likely to sponsor HMOs.