A Descriptive Economic Analysis of HMO Mergers and Failures, 1985-1992

This study examines all 81 health maintenance organization (HMO) mergers that occurred in the United States from 1985 to 1992. The primary emphasis is on describing organizational factors that are associated with mergers, identifying market environments in which mergers are more likely to occur, and analyzing the financial status of merging HMOs. Overall, the study presents an up-to-date portrait of mergers in this important health care industry. We found that HMO mergers are relatively rare, but, over time, a substantial proportion of HMOs and their enrollees are affected by mergers. Ouranalys is suggests that some financially weak HMOs might have failed if they had not merged into stronger plans. This finding gives qualified support to the failing-company antitrust defense for HMO mergers. However, mergers between large, financially sound HMOs may have anticompetitive effects on consumers of HMO services.