HMO Survival: Determination of Optimal Size

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Abstract
The concept of prepaid health care as embodied by health maintenance organizations (HMOs) provides variety in the provision and coverage of health care benefits. This is important in the development of a diverse and appropriate health care system for the US. HMOs were developed to provide a cost-effective, alternative form of health care delivery and financing to ensure access and continuity. HMOs can achieve this only by sustaining organizational viability. A survivor analysis modelling technique is employed to analyze the optimal size of HMOs by region model type and profit status over the period from 1977 through 1986. A determination of an optimal size category establishes a survival criterion for HMOs. A minimum enrolment of at least 25,000 members should be achieved as quickly as possible. This minimum standard can be used as a guide for initial success, however a higher enrollment in the 40,000 to 60,000 member range appears necessary for longer-term survival.

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