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Healthy Returns in Managed Care

   

Having to get approval from your family doctor to go to a specialist, getting your prescription filled by mail & getting kicked out of the hospital a day after giving birth are but a few of the consequences of managed care, which attempts to ration health care in a more efficient way. Though it's a pain in the neck for patients, its a joy for employers who must foot their bills. And if the past few years are any indication, managed care companies will continue to enjoy high growth in both profits and sales.

Managed care is the result of one factor - the private sector's unwillingness to pay increasingly large health care bills for their employees. After years of seeing double digit increases in their health care premiums, thousands of companies decided to push their employees into health care maintenance organizations (HMOs). HMOs are usually far cheaper than regular fee-for-service medicine. HMOs usually set a fixed price per employee regardless of the amount of care that is needed. Businesses can plan costs better and HMOs must find a way of making money with limited resources.

In the last five years or so, managed care companies, which run HMOs, have been able to save their employer clients a bundle while consistently improving sales and earnings. In 1994, for example, managed care companies boosted net income by 35 percent while growing sales at a rate of 30 percent. More recently, U.S. Health Care has done so well that it was acquired by Aetna Insurance which, though it started its own unit, needed to become a dominant player in the fields.

One reason why HMOs will continue to bolster profits is that the time-consuming process of signing up doctors for them is being carried out by physician practice management organizations. These companies find doctors, sign them up and in effect, sell entire state networks of doctors to the HMOs. Another reason is that several big HMOs have made big investments in computers and other infrastructure to speed up marketing of new enrollees.

Bottom line: as corporations continue to find that cutting costs is the only way to increase earnings, they will continue to push their employees into managed care programs and away from traditional and more costly health insurance. Managed care companies, therefore can continue to expect ever-rising sales.

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