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A survey indicates that the profits of managed-care organizations have increased over 200% since 1987. The survey covers the performance of 96 health maintenance organizations (HMOs) between 1987 and 1991 and preferred provider organizations (PPOs) between 1989 and 1991. For-profit HMOs reported a 161% increase in net income. Not-for-profit organizations were more profitable than for-profit prepaid plans, with profit increases of almost 700%. The growth in the managed care industry will be led by HMOs and PPOs.

Providers-the same folks said to be interested in launching Medicare provider-sponsored organizations and in direct contracting with large employer purchasing groups-appear to be bailing out of the insurance niche in [...]

The decline in the costs for retiree health care plans in 1997 is mainly due to the shift of retirees to managed care plans and health maintenance organizations (HMO). The shift in the health plan is beneficial to employers which would give them control in cost savings. There are enrollment increases in HMOs and preferred provider organizations but, in contrast to these, employers are also eliminating retiree health coverage to drastically reduce costs for health plans., Employers, with a powerful assist from managed care, saw retiree health care plan costs drop in 1997. The drop was the first since A. Foster Higgins & Co. Inc., now [...]

A reformed healthcare system will reward those providers that employ utilization controls instead of discounts to rein in medical costs. This development will hurt PPOs, which offer patients a wide range of providers, but rely on provider discounts to control costs. Only one in six PPOs currently employ risk contracting. One of these is a Faribault, MN, group that has reduced costs by encouraging patients to receive medical care close to home.