How HMO Expenses Break Down

From large employer alliances to small senior citizen groups, an increasing number of consumers want to know how California’s health maintenance organizations are spending their health-care dollars. They want to know how much goes to providing medical care as opposed to paying for salaries, advertising, paperwork and profits.

How much an HMO spends on doctors, hospital and other direct medical expenses is not, by itself, an accurate gauge of of overall medical quality, health-care experts say. However, many employers and consumers now are using such information as one indicator to help them evaluate the performance of HMOs.

Health plan executives caution that the percentage of a company’s revenue that is spent on medical care versus other expenses is not always directly comparable because of differences in how HMOs’ business are structured and their mix of products.

The following figures are from a report on 37 HMOs issued by the California Medical Assn., a physicians’ trade group.

Highest Medical-Care Spenders

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Name % medical care % administration % profit 1. Kaiser Foundation 96.8% 2.1% 1.1% Health Plan 2. Health Plan 87.9% 8.6% 3.5% of the Redwoods 3. InterValley Health Plan 87.5% 12.5% .06% 4. United Health Plan 86.8% 13.8% (-0/6%) 5. ValuCare/Central 84.4% 14.8% 0.8% Valley Health Plan 6. PacifiCare 84.1% 11% 4.9% 7. FHP/Takecare 83.8% 12.3% 3.9% 8. Omni Health Plan 83.5% 16.1% 0.4% 9. Blue Shield HMO 82.2% 22.8% (-4.9%) 10. Maxicare 82% 10.7% 7.3%

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Lowest Medical-Care Spenders

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Name % medical care % administration % profit 1. CaliforniaCare 73% 16.3% 10.6% 2. Molina Medical Centers 75.8% 12% 12.2% 3. Community Health Group 75.9% 19.3% 4.8% 4. Aetna Health Plans 77.4% 9.6% 13% 5. Foundation Health 77.4% 16.5% 6.1% 6. MetLife Health Care 77.5% 20.9% 1.7% 7. Community Health Plan 77.8% 12.3% 9.9% 8. CareAmerica 78.3% 19.1% 2.6% 9. Lifeguard 79.4% 18.4% 2.2% 10. Health Net 80.4% 12.9% 6.8%

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Note: Figures are only for private health plans with membership exceeding 40,000 members.

Source: California Medical Assn. (figures as reported by plans to California Department of Corporations and other public financial filings)