This study examines all 81 health maintenance organization (HMO) mergers that occurred in the United States from 1985 to 1992. The primary emphasis is on describing organizational factors that are associated with mergers, identifying market environments in which mergers are more likely to occur, and analyzing the financial status of merging HMOs. Overall, the study presents an up-to-date portrait of mergers in this important health care industry. We found that HMO mergers are relatively rare, but, over time, a substantial proportion of HMOs and their enrollees are affected by mergers. Ouranalys is suggests that some financially weak HMOs might have failed if they had not merged into stronger plans. This finding gives qualified support to the failing-company antitrust defense for HMO mergers. However, mergers between large, financially sound HMOs may have anticompetitive effects on consumers of HMO services.
Get full access to this article
View all access options for this article.
References
1.
Blackstone, E. A. , and J. P. Fuhr, Jr."Hospital Mergers and Antitrust: An Economic Analysis."Journal of Health Politics, Policy and Law14 (summer 1989): 383-403.
2.
Bothwell, J. L. , and T. F. Cooley. "Efficiency in the Provision of Health Care: An Analysis of Health Maintenance Organizations."Southern Economic journal48 (1982): 970-984.
3.
Carlton, D. W. , and J. M. Perloff. Modern Industrial Organization. Glenview, IL: Scott, Foresman, 1990.
4.
Christianson, J. B. , B. Dowd, and R. Feldman. "Open-Ended Options in TEFRA Risk Contracts with HMOs."Managed Care Quarterly in press.
5.
Christianson, J. B. , S. M. Sanchez, D. R. Wholey, and M. Shadle. "The HMO Industry: Evolution in Population Demographics and Market Structures."Medical Care Review48 (spring 1991): 3-46.
6.
Clement, D. G."HMO Survival: Determinants of Optimal Size."Health Services Management Research in press.
7.
Collins, W. D. , and S. C. Sunshine. "Rigor and Sophistry in the New Merger Guidelines."The American Enterprise, March/April 1993, 60-71.
8.
Feldman, M. L. , and D. K. Murata. "Why Mergers Often Go `Pfft.' "ABA Banking Journal83 (1991): 34, 36.
9.
Feldman, R."The Welfare Economics of a Health Plan Merger."Journal of Regulatory Economics6 (1994): 67-86.
10.
Feldman, R. , M. Finch, B. Dowd, and S. Cassou. "The Demand for Employment-Based Health Insurance Plans."Journal of Human Resources24 (winter 1989): 115-142.
Manning, W. G. , A. Leibowitz, G. A. Goldberg, W. H. Rogers, and J. P. Newhouse. "A Controlled Trial of the Effect of a Prepaid Group Practice on Use of Services."New England Journal of Medicine310 (1984): 1505-1510.
13.
"Minnesota Attorney General Considers Merger Moratorium."Health Alliance Alert, 11 March 1994, 2.
14.
Office of Prepaid Health Care , U.S. Department of Health and Human Services. 1988. Solvency Surveillance Indicators. mimeograph (April).
15.
Palsbo, S. E. , V. P. Miller, L. Pan, C. Bergsten, D. N. Hodges, and C. Barnes. Directory of Health Maintenance Organizations. Washington, DC: Group Health Association of America, 1993.
16.
Schlesinger, M. , D. Blumenthal, and E. Schlesinger. "Profits under Pressure: The Economic Performance of Investor-Owned and Nonprofit Health Maintenance Organizations."Medical Care24 (1986): 615-627.
17.
"2 California H. M. O. Providers Agree to a Merger."New York Times, 5 March 1994, 21.
18.
Weiss, L. W. , ed. Competition and Price. Cambridge, MA: MIT Press, 1989.
19.
Wholey, D. R. , and L. R. Burns. "Organizational Transitions: Form Changes by Health Maintenance Organizations." In Research in the Sociology of Organizations, vol. 11, edited by S. Bacharach. Greenwich, CT: JAI, 1993.
20.
Wholey, D. R. , and J. B. Christianson. "Product Differentiation among Health Maintenance Organizations: Causes and Consequence of Offering Open-Ended Products."Inquiry31 (spring 1994): 25-39.
21.
Wholey, D. R. , J. B. Christianson, and S. Sanchez. "Organizational Size and Failure among Health Maintenance Organizations."American Sociological Review. 57 (1992): 829-842.
22.
Wholey, D. R. , J. B. Christianson, and S. Sanchez"Professional Reorganization: The Effect of Physician and Corporate Interests on the Formation of Health Maintenance Organizations."American Journal of Sociology99 (1993): 175-211.
23.
Wholey, D. R. , R. Feldman, and J. B. Christianson. "The Effect of Market Structure on HMO Premiums."Journal of Health Economics, in press.
24.
Wholey, D. R. , R. Feldman, and J. B. Christianson. "Scale and Scope Economies among Health Maintenance Organizations." Draft paper. Department of Social and Decision Sciences, Carnegie-Mellon University, Pittsburgh, PA, 1995.
25.
Williamson, O. E."Economies as an Antitrust Defense: The Welfare Trade-Offs."American Economic Review58 (1968): 18-36.
26.
Woolley, J. M."The Competitive Effects of Horizontal Mergers in the Hospital Industry."Journal of Health Economics8 (1989): 271-291.
