Market Instability Puts Future of HMOs in Question

Publication Date: January 2001

Publisher: Center for Studying Health System Change

Author(s): Glen P. Mays; Sally Trude; Lawrence P. Casalino; Patricia Lichiello

Research Area: Health

Type: Report

Coverage: Washington

Abstract:

In September 2000, a team of researchers visited Seattle, Wash., to study that community's health system, how it is changing and the effects of those changes on consumers. The Center for Studying Health System Change (HSC), as part of the Community Tracking Study, interviewed more than 85 leaders in the health care market. Seattle is one of 12 communities tracked by HSC every two years through site visits and surveys. Individual community reports are published for each round of site visits. The first two site visits to Seattle, in 1996 and 1998, provided baseline and initial trend information against which changes are tracked. The Seattle market includes King, Snohomish and Island counties. Over the past two years, hospital and physician contract disputes with health plans have disrupted the Seattle health care market, causing considerable instability in provider networks and threatening the viability of many managed care products. In 1998, expected growth in health maintenance organization (HMO) enrollment attracted national health plans to Seattle, raising concerns about potential erosion of the health care market's local nature. Since then, two national plans have left the area after failing to achieve substantial market share. Meanwhile, hospitals and physicians have abandoned risk-based contracting with health plans, leaving the future of HMOs in doubt.