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HMO Industry Profits to Rebound in '97 After Two Years of Declines, Corporate Research Group Predicts

NEW ROCHELLE, N.Y., Nov. 25 /PRNewswire/ -- Managed care industry profits should rebound in 1997 after two years of declines, according to a new forecast issued today by Corporate Research Group (New Rochelle, NY). "The Outlook for Managed Care, 1997" forecasts that industry profits will rise 13% in 1997 to nearly $3.3 billion, after dropping 20% in 1995 and 10% in 1996.

"In order to deal with media criticism and increased government oversight of its activities, the industry is likely to move away from its somewhat rigid defense of current managed care practices to offer a far broader range of products and choices," says Efrem Sigel, Corporate Research Group president.

HMO revenues are expected to grow nearly 15% in 1997 to around $126 billion, as the industry attempts its first significant price increase since 1994, according to the report. Premiums were flat to down in 1995 and 1996, the report says.

"The Outlook for Managed Care, 1997" projects enrollment growth slightly below the 14% achieved in 1996. The best gains should come in Medicare members, with HMOs enrolling nearly 1 million new Medicare beneficiaries in 1997. Sigel says states offering the best potential for HMO growth include Texas, Florida, Pennsylvania, Ohio, North Carolina, Virginia and Missouri.

"Mergers and acquisitions will continue apace, particularly among the smaller HMOs and in the Blue Cross and not-for-profit segments," Sigel says. However, after three mega-deals completed or announced in 1996 (Aetna-U.S. Healthcare, PacifiCare-FHP and Foundation-Health Systems International), the dollar volume of transactions may be lower in 1997, he predicts. The total of deals announced or completed in 1996 is around $15 billion, compared to $4.5 billion in 1995.

If the PacifiCare-FHP and Foundation-HSI deals are completed, the report says, there will be five giant managed care companies with revenues approaching or exceeding $10 billion in 1997: Kaiser Permanente (Oakland, CA), Aetna U.S. Healthcare (Blue Bell, PA), United HealthCare (Minneapolis, MN), PacifiCare (Cypress, CA) and Foundation Health Systems (Foundation: Rancho Cordova, CA; HSI: Woodland Hills, CA).

According to CRG, the 12 largest companies based on June 1996 HMO enrollment, are: Kaiser, United, Aetna U.S. Healthcare, Prudential, PacifiCare, FHP, Health Systems International, Humana, Cigna, Foundation, Oxford Health Plans, New York Life Insurance and Harvard Pilgrim.

"The Outlook for Managed Care, 1997" has profiles of 46 leading managed care organizations, and is available from Corporate Research Group, 524 North Ave., #302, New Rochelle NY 10801. Corporate Research Group, Inc. is a leading source of information about managed care and physician practices. It publishes the authoritative industry newsletters, Managed Healthcare Market Report and Physician Practice Management Report.
 Key Facts about the Managed Care Industry, 1995-96
 1995 1996P
 Revenues (bill) $96.5 $110.0
 Profits (bill) $3.2 $2.9
 HMO members (millions) 58.2 66.7

P = projected

(C) Corporate Research Group, Inc., New Rochelle NY 10801; 914-235-6000
 Leading HMOs, Ranked by June 1996 HMO Enrollment
 1. Kaiser Permanente, Oakland, CA 7.2 million
 2. United HealthCare, Minneapolis, MN 4.0 million

3. Aetna U.S. Healthcare, Blue Bell, PA and
 Hartford, CT 3.9 million
 4. Prudential, Roseland, NJ 2.1 million
 5. PacifiCare, Cypress, CA 2.0 million
 6. FHP, Fountain Valley, CA 1.9 million

7. Health Systems International,
 Woodland Hills, CA 1.8 million
 8. Humana, Louisville, KY 1.8 million
 9. Cigna, Philadelphia, PA 1.4 million
 10. Foundation Health, Rancho Cordova, CA 1.4 million
 11. Oxford Health Plan, Norwalk, CT 1.3 million
 12. New York Life/NYLCare, New York, NY 1.0 million
 12. Harvard Pilgrim, Brookline, MA 1.0 million

(C) Corporate Research Group, Inc., New Rochelle NY 10801; 914-235-6000

SOURCE Corporate Research Group, Inc.
 -0- 11/25/96

/CONTACT: Efrem Sigel of Corporate Research Group, Inc., 914-235-6000/

CO: Corporate Research Group, Inc. ST: New York IN: HEA FIN SU:

GW-AK -- NYM008 -- 3458 11/25/96 08:01 EST
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Publication:PR Newswire
Date:Nov 25, 1996
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