Large markets foster HMO growth, drive utilization down

Three-quarters of all HMO enrollment growth in the past three years has occurred in metropolitan markets with populations exceeding 1 million, according to a report that documents HMO enrollment, penetration, and competition in 298 metropolitan markets across the United States.

The InterStudy Competitive Edge Regional Market Analysis indicates that large metro areas are able to support more HMOs, thus fostering greater competition. Since 1994, HMOs have increased their share of large markets from 23.3% to 31.2%. HMOs in these markets also use more capitation and are more involved in Medicare and Medicaid, the report states. In contrast, many moderately sized areas have not seen a new HMO entrant for five years or more. These markets have lower HMO penetration, and the HMOs are less likely to serve Medicare and Medicaid populations.

In many major markets, HMO competition seems to have driven utilization down, often regardless of provider supply. The only exception is New York City, where a large supply of specialists appears to drive high utilization in spite of strong HMO competition.

For most markets, the effect of HMO competition on utilization remains unclear. In these areas, such as St. Louis, Cleveland, and Akron, OH, utilization remains relatively high while specialist supply and HMO competition are moderate.

To order a copy of the report, contact InterStudy at 1-800-844-3351.

Following are names and telephone numbers of sources quoted in this issue:

Phoenix Healthcare Consulting; Angela Herron, consultant. Telephone: (513) 762-7822.

Gwinnett Dermatology, Snellville, GA; Melinda Lomax, office manager. Telephone: (770) 972-4845.

MD Care Networks, Englewood, CO; Cindy Cinquemani, director of operations. Telephone: (303) 761-4300.

Physician’s Specialty Corp., Atlanta, Ramie Tritt, chairman and president, Richard Ballard, CEO. Telephone: (404) 256-7535

Summit Medical Group; Tim Young, MPH, CMPE, CEO. Telephone: (423) 687-6939.