HMO Mergers: Analysis of Trends and Public Policy Issues

Do HMO mergers serve the public interest? This project evaluated mergers among existing HMOs in order to develop a framework for deciding whether specific mergers serve the public interest. The investigators: (1) determined whether more efficient HMOs merged into less efficient HMOs or vice versa; (2) determined the relative importance of factors that lead to HMO mergers and failures; (3) investigated the impact of HMO mergers on prices and efficiency of HMOs; and (4) developed a model for public policy evaluation of HMO mergers. The objective of this project was to provide a model for policymakers to determine whether the benefits of mergers of smaller HMOs into larger ones (i.e., lower costs and higher efficiency) outweigh the reductions in consumer choice which may result from reduced competition in local markets.