HMO partnering: the provider dilemma

While the growth of HMOs has slowed patient visits to doctors, it also has created a deluge of press clippings. On July 16, 1996, three articles on the subject appeared in the Wall Street Journal, front section. The headlines painted a vivid picture of the forces acting on HMOs and providers alike (Figure 1). The articles portended more change for healthcare. The "shake-out," a term applied to industries in serious transformation, brings shedding of excess capacity and loss of jobs and income. Providers, in particular, find themselves in a difficult dilemma. They must not only cut costs as reimbursement drops, but also retain patients with good outcomes and high quality service. Patient retention means keeping the individual patient from switching to another provider and keeping the insurer's group of patients as an authorized provider for that insurer. The relationship between provider and HMO lies at the heart of the provider dilemma. The HMO structure, which shifts financial risk for care, is quickly setting the standard, for healthcare pricing, medical standards, and management practices. Understanding and responding to HMO needs are vital to competitive advantage and survival. The article discusses the inherent dilemma of HMO and provider partnering and suggests provider responses.