If Health Maintenance Organizations (HMOs) are to survive and prosper, they must abide by a large volume of potentially disruptive laws and regulations at the federal, state, and local levels. Some have suffered extreme financial loss and even been driven out of business because of legal transgressions. This study explores the ability of middle managers in large and small HMOs to distinguish between legal and illegal practices in light of federal laws. The study uncovered evidence of lack of this ability especially for managers in small HMOs. Various remedial measures are proposed for this problem.
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