Non-profit Health Care Regulation Does Make a Difference: One State's Experience

Abstract

AbstractThe viability of non-profit organizations depends upon the interaction of competent management, an engaged board, and effective regulators. When the first two elements are missing or weak, the regulatory role acquires an even greater significance. Although Massachusetts is a renowned center of medical excellence, its non-profit health care industry faces serious financial challenges. Symptomatically, all five of its non-profit HMOs, which together provide the vast majority of managed care coverage within the state, have faced collapse or near collapse over the past decade. In each instance, the management and boards aggressively pursued market share in a regulatory environment providing minimal statutory guidance and supervision. The experiences of these HMOs are presented in five mini-case studies that focus on the factors behind their financial distress and the belated regulatory response. The paper concludes that ad hoc regulation can undermine the viability of a non-profit health care system.