The Financial Experience of Hospitals with HMO Contracts: Evidence from Florida

Abstract

In this paper, we report results from the first study to systematically examine trends in the financial experience of hospitals with health maintenance organization (HMO) contracts. The longitudinal analysis (1990 through 1997) focused on hospitals in Florida. Hospital operating margins for HMO contracts grew tighter toward the end of the study period when the median margin was less than 1%. Teaching hospitals had operating margins that on average were below that of their nonteaching counterparts. The continued growth of HMOs and other managed care entities may have important implications for the future financial viability of U.S. hospitals.