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Health Care in California – Managed Care HMO Research Paper


This paper comprises of two sections. The first section entails an in-depth discussion of Managed Care and other Health Maintenance Organizations (HMOs) within the health care sector in California. The second section entails a detailed research on LaSalle Medical Associate, one of the vibrant health organizations offering community services in various countries in the United States.

Research has shown that HMO industry became increasingly visible in most of United States since 1980. The enrollment at the moment has increased fourfold rising from 9 million to 36.5 million by the end of 1990. Recent consolidations have created a channel for implementation of new health plans.

California is among the top ten states that have the highest number of people enrolling for HMOs. The growth and benefits of HMOs have drawn the attention of investors who are willing to venture into the larger health system to offer appropriate and competitive health services. This explains why the industry has continued to grow immensely amid some challenges.

Growth and profitability of Managed Care HMO

Managed Care HMO has grown immensely for decades due to the rise of healthcare insurances that give employees and the general public the option to seek alternatives in medical schemes that are cost –effective. The Managed Care HMO program also attracted many employees who enrolled in order to benefit from the health package that was on offer.

However, it is important to admit that other better schemes have emerged thus posing stiff competition to this program. Actually, Baicker, Chernew and Robbins (2013) assert that for over one decade now, the enrollment rate for Managed Care HMO has declined. In other words, HMOs have historically dominated California health sector for long until recently when other groups of health insurance came up.

An example is the Kaiser Foundation (Feldstein, 2011). Despite the competition, research has shown that Managed Care HMO takes 60% of the market share, implying that they are relatively stable (Copeland & Zeber, 2013). Upon a careful analysis, there are numerous benefits derived from the industry. One the benefits is the cost saving services. Moreover, the industry provides reimbursement and physician compensation to its clients.

Baicker et al. (2013) underscore that employees receive quality care particularly at a lower price due to increased pressure from the competitors. The chart below illustrates that the industry growth rate especially in regards to the managed care HMO since 1998.

Industry growth rate

Major groups of the industry

Other major groups in the industry include Kaiser Foundation health plan and Kaiser Enrollees in California. It is important to note that the Kaiser Foundation Health Plan is a vibrant national HMO. However, Kaiser Enrollees has been associated with strong allegiance since it remained relatively stable regardless of the employer-based health insurance decline.

According to a study conducted by Baicker et al. (2013), it is evident that the Kaiser Foundation has secured permit to offer health insurance to self-employed individuals. Moreover, the Kaiser program has opened an avenue for self-insured employees to access their products

Competitor Analysis

HMOs industry in California is highly competitive at the moment due to various reasons. Baicker et al. (2013) explain that there have been significant changes such as business consolidation, legislative reforms, new strategic alliances and market pressures. These forces have brought better, organized and informed customer base.

The presence of numerous healthcare plans has resulted into emergence of substantial competition between the for-profit and non-profit HMOs and self-funded plans. Some of the HMOs with largest market share include but not limited to the Kaiser Foundation, Blue Shield and Kaiser Enrollees. One of the strengths of these major competitors is that they are able to satisfy employees and employer choices (Feldstein, 2011).

The presence of numerous HOM plans gives the clients an opportunity to select products that suits them. Moreover, due to increased competition, the HMO plans are made cheap and affordable in order to retain the consumers. Nonetheless, the competitors have weaknesses since most of them have compromised the quality of products offered. As the saying goes, “cheap is expensive”.

Therefore, most of the Health insurance providers offer cheap products with very poor quality. On the other hand, those that offer high quality product mix escalate prices unreasonably thereby ending up reaping heavily from employers and self-insured employees.

Structure of the industry using Porters 5 forces model

In reference to Porters 5 forces model, there are 5 forces that have influenced competition of HMO plans. As a result, these forces have defined the structure of the industry. It is apparent that the structure of the industry is even since new entrants can venture into the market and sell their health plans. Moreover, the industry has matured hence there is no intense threat for substitute products (Feldstein, 2011).

Consumers who are employers and employees have bargaining power for products in the market. At the same time, the suppliers who are insurance providers have bargaining power for products offered so long as they meet the expected standards. At the moment, there is slight competition rivalry thus attracting more competitors into the market (Feldstein, 2011).

Key success factors in the industry

The key success factors in the industry are quality, cost and uniqueness of products (Feldstein, 2011). For a firm to do well in the industry, it must maintain high quality of health services, products must be pocket-friendly and unique to ensure that they stand out in the market.

Noticeable trends in the industry

Baicker et al. (2013) point out that there has been immense growth in the HMO industry. Better products have emerged to replace the substandard ones. However, despite the positive trend, the industry has been engulfed by challenges. There are numerous growth problems that have engulfed the industry since its establishment in the 1980s.

For instance, research has revealed that there was a speedy growth of HMOs where the number of plans shoots to 306 (Hibbard, Greene, Sofaer, Firminger & Hirsh, 2012). It is important to note that growth was fastest between 1984 and 1987 when enrollment doubled. During this time, the financial implications of the growth pattern were unpredictable (Quinn et al., 2012).

Increase of new plans lead to a considerable decline of prices due to competition. It is worth noticing that some health providers proved to be better managers than others so some plans were phased out. Besides this, profits fetched could not be enough to compensate the start-up costs thus some health plans ceased operation until in the 21st century when HMO consolidations were done (Feldstein, 2011).

Another notable aspect in the industry trend is about employer influences. One of the significant influences that have shaped the industry is employers who have been quick to challenge the immense escalation of health insurance costs. Employers have actively analyzed the cost-benefits of every plan. Hence they have contributed to the designing of overall mix product as well as the integration of holistic benefit package. This has increased the demand of some of the HMO products.

Opportunities and threats in the industry

One of the opportunities available in the industry is that health insurance providers are allowed to package their products in a manner that will help them retain their clients. For instance, most of the HMOs schemes allow cost-sharing between the employee and employer. For example, the Blue Shield is a health insurance provider that offers Core Flex services to employers who have a group of over 50 employees yet the package is designed in a way that there is a potential for employee cost-sharing (Hibbard et al., 2012).

In regards to LaSalle Medical Associates, evidences from literature have shown that organization began as a pediatric clinic in Fontana. The clinic was set up in June 1984 by Albert Arteaga and his wife Maria (LaSalle Medical Associates, 2015). The clinic has, since then, continued to offer health services and it became an Independent Practice Associate in 1996 (LaSalle Medical Associates, 2015).

Upon a careful review of literature, it is factual that the associate is one of the largest Independent clinics in Los Angeles, Riverside and San Bernardino. LaSalle’s main goal was to enroll children into healthy family program within the corporate location. However, it is evident that the goal broadened as the organization began to focus on the wider community.

LaSalle Medical Associates (2015) outline that after its establishment and expansion, it has expanded thereby establishing several clinics in Hesperia, Riverside, Los Angeles, San Joaquin, Kings and Fresno and San Bernardino countries (Copeland & Zeber, 2013). The associate began with less than 3,000 enrollees and two staff model who offered managed care.

Due to consistent support from health plan partners and healthcare institutions, LaSalle has expanded into a four-staff-model site and has a record of over 200,000 managed care clients (LaSalle Medical Associates, 2015). The Medial Associate has numerous networks offering specialty and primary care services.

Most of the healthcare services offered at LaSalle are community based. However, the prime target population includes children. Research has shown that the Medical Associate offer medical services at its highest level through partnership with numerous hospitals. Research has shown that LaSalle strives to maintain maximum and efficient delivery of health services (Copeland & Zeber, 2013).

This is one of the factors that have made the Medial Associate to maintain consistent financial records. LaSalle offers physician and surgical services. In Order to accommodate wide range of audiences, the organization incorporated gynecology and obstetrics services.

It is therefore undisputable that LaSalle adequately meets the need of the community in which its offices are based. Besides, the organization provides diverse insurance products for patients. This has in the long run contributed to increased consumption of their products and services.

Financial Analysis of LaSalle Medical Associates

According to information presented by LaSalle Medical Associates (2015), there are no precise figures revealing the financial performance of the group. However, one can refer to various growth indicators such as the area overage, patient turn out and employee satisfaction. Using these benchmarks, one can analyze that the Medical Associate is doing well financially.

LaSalle Medical Associates (2015) assert that the organization is one of the fast-paced healthcare institutions. Moreover, the organization’s growth is as a result of high quality services and an indication that the physician-patient ratio is up to date. The organization has a long-term financial wellbeing since it has managed to enroll and maintain highly trained and competent personnel (Copeland & Zeber, 2013).

The Organization’s output has continued to increase for over 3 decades and this can imply that services offered are profitable. One of the strengths of LaSalle is that it is able to collaborate and partner with other health institutions in order to provide care to patients in various locations. It is evident that mutual partnership adds value to services and products offered by partnering parties.

As a matter of fact, LaSalle has been able to increase its coverage to handle community needs in more than six countries. Upon examining the services offered when the organization began, LaSalle Medical Associates (2015) admits that a lot of growth has been registered thus making it possible to offer a wide range of services. Moreover, LaSalle has employed qualified and dedicated healthcare professionals who are able to attend to children and adults.

Upon a careful review of Literature, one can discern that LaSalle primarily use Medi-Cal, Blue Shield, Care 1st, Molina, Inland Empire Health Plan and Health Net health products (Copeland & Zeber, 2013). This gives the clients an opportunity to choose the best health products thus increasing consumer satisfaction.

One of the weaknesses is that LaSalle has lagged behind in technology thus making it challenging to streamline healthcare delivery within its locations. However, empirical research has shown that LaSalle is upgrading its technology in order to embrace electronic health record management.

Moreover, the corporate offices have begun to transform management procedures to ensure that patient information is secure. It is important to note that initially, LaSalle specialized on children care alone (Copeland & Zeber, 2013). Therefore, it is certain that its personnel have more expertise in children’s matters than adults. Therefore, LaSalle does perfectly well in children affairs unlike when dealing with senior and adult patients.

It is also important to note that LaSalle is good at partnering with other health organizations to provide the best to the community. Some of its affiliates include Central Valley General Hospital in Hanford, Arrowhead Regional Medical center and Community Hospital at San Bernadino (LaSalle Medical Associates, 2015).

There are packages that allow employers to subscribe and pay monthly costs for basic care delivery. Such a package is cost effective since the employers do not need to reciprocate the cost to the employees (Quinn et al., 2012). The other opportunity is that HMOs are becoming popular hence the products are at a high demand.

This therefore, creates room for supply thus encouraging formulation of better health plans. One of the impending threats is that the HMO industry is becoming broader with variety of products (Hibbard et al., 2012). The health insurance providers look like they offer mix of products. Broadening of the market has adverse effect to for-profit health insurance providers since they are not able to get better returns through monopoly.

The lack of monopoly lowers the costs of health services because employees will opt for the cheapest health product. At the same time, health insurance providers have to maintain quality without which the employees will go for other options.


Baicker, K., Chernew, M. E., & Robbins, J. A. (2013). The spillover effects of Medicare managed care: Medicare Advantage and hospital utilization. Journal of health economics, 32(6), 1289-1300.

Copeland, L. A., & Zeber, J. E. (2013). Advancing Research in the Era of Healthcare Reform the 19th Annual HMO Research Network Conference, April 16–18, 2013, San Francisco, California. Clinical medicine & research, 11(3), 120-122.

Feldstein, P. (2011). Health care economics. New York: Cengage Learning.

Hibbard, J. H., Greene, J., Sofaer, S., Firminger, K., & Hirsh, J. (2012). An experiment shows that a well-designed report on costs and quality can help consumers choose high-value health care. Health Affairs, 31(3), 560-568.


Quinn, V. P., Jacobsen, S. J., Slezak, J. M., Van Den Eeden, S. K., Caan, B., Sternfeld, B., & Haque, R. (2012). Preventive care and health behaviors among overweight/obese men in HMOs. The American journal of managed care, 18(1), 25-32.

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