HealthLeaders-InterStudy, a leading provider of managed care industry intelligence, finds that rental PPO networks are profitable and poised for growth. According to spring issues of Health Plan Analysis, investors are betting that the Medicare Modernization Act and the consumer-driven healthcare movement will increase demand for network companies.
"PPO network companies are a mystery to most people," said Micaela Brown, HealthLeaders-InterStudy analyst. "But savvy investors know they are essential to the managed care industry. Interest rates are low and borrowing is cheap, so firms often get a shot in the arm from venture capitalists to expand service areas -- most often by buying existing networks."
The lack of clarity about PPO networks exists partly because most network companies are privately held and fiercely protective of their operations and finances. Since they seldom insure lives, they are largely exempt from state laws and reporting requirements.
While competition between rental networks and insurers may be unavoidable, Brown said it is unlikely to become overly contentious. A few insurers, like Coventry Healthcare and PacifiCare Health Systems, have bought PPO rental networks but plan to stay focused on their risk-bearing business. And insurers rely on rental networks to fill gaps in their coverage areas, where they don't have contracts with hospitals and physicians.
Brown said the reaction to PPO consolidation among most stakeholders ranges from neutral to positive.
"Physicians, however, are the exception since many doctors, already unsatisfied with the reimbursement system, say it will make them even more powerless to control their fee schedule," Brown said. "Additionally, some industry analysts say provider network companies don't deliver on quality measures like managed care companies do."
HealthLeaders-InterStudy, a newly formed company of Decision Resources, Inc. (http://www.decisionresources.com/), is the authoritative source for managed care data, analysis, and news. For more information, please visit both Web sites at http://www.healthleaders.com/ and http://www.interstudypublications.com/.
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SOURCE: Decision Resources, Inc.
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