Data shows profitability eludes most small HMOs

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Medical expenses per enrollee rose 4.4 percent at small HMOs for the first half of year 2000, according to a news release from Weiss Ratings Inc. |ret||ret||tab|

The figure eclipsed a corresponding 3.9 percent increase in health care revenues per enrollee, making profitability an elusive goal for most small HMOs. |ret||ret||tab|

Comparing data from the first half of 2000 to the same period a year earlier, a Weiss study pointed to a widening gap between small (those with less than 100,000 enrollees) and large HMOs (more than 500,000 enrollees). |ret||ret||tab|

While large HMOs also experienced a sharp rise in medical costs per enrollee (7.2 percent on average), they were able to more than offset the increase by boosting revenues at a quicker pace (7.8 percent).|ret||ret||tab|

"HMOs have been pushing successfully for premium rate increases for several years now in an effort to get back to profitability," said Martin D. Weiss, chairman of Weiss Ratings. |ret||ret||tab|

"However, with medical costs rising at such a fast pace, quite a few HMOs, particularly the smaller companies, will continue to lose money," Weiss continued.|ret||ret||tab|

An unequal distribution of profits further highlights the disparity between the small and large HMOs. |ret||ret||tab|

The 373 small HMOs reviewed in the study had an aggregate loss of $127 million for the first half of 2000, with 52 percent posting a loss for the period. |ret||ret||tab|

In contrast, the largest HMOs, just 35 companies, reported a combined net profit of $528 million.|ret||ret||tab|

Overall, the HMO industry recorded aggregate net income of $370 million in the first six months of 2000, up from $91 million in the first half of 1999.|ret||ret||tab|

In reviewing the industry's financials for the first half of 2000, Weiss Ratings upgraded the ratings for 21 HMOs while downgrading 12. |ret||ret||tab|

The Weiss ratings are based on an analysis of an institution's capitalization, asset quality, earnings, liquidity and stability. |ret||ret||tab|

The latter category combines a series of factors including five-year trends, asset size and growth, strength of affiliate companies and risk diversification.|ret||ret||tab|

Weiss Ratings Inc. is the only provider of independent financial ratings on health maintenance organizations. |ret||ret||tab|

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