Managed care plans should see higher profits in 2003

At least one financial study predicts an overall increase in physician reimbursement by health plans, although not as large as their premium increases.

By Robert Kazel, AMNews staff. Feb. 24, 2003.

Relying on higher premiums and benefiting from only moderate medical inflation, the managed care industry will see its 2003 profits rise at about the same rate as last year's, according to a new study.

The study, by New Rochelle, N.Y.-based Corporate Research Group, said the industry will have a gain in net income of 15.9% this year compared with an increase in profits of 15.8% last year.

The group attributed the expected profitability of the sector to its adoption of electronic information technology, which will add to efficiency, and to continued double-digit premium increases that will easily outpace increases in medical costs.

"The industry's financial health is the best it's ever been," said Carl Mercurio, president and publisher of the research group. "It's on a roll."

The study assumes average premiums increases of 15.5% and medical cost increases of about 12%. It did not specify what plans would do regarding physician compensation; Mercurio said the study did not seek that information from health plans.

Another report on managed care in January by Fitch Ratings, however, predicted that medical costs attributable to physician income will increase "in the high single digits" in 2003. That would be about the same as in 2002, according to Douglas L. Meyer, senior director of the financial ratings company.