Recent determinants of new entry of HMOs into a Medicare risk contract: a diversification strategy.

This study provides knowledge of more recent entry of health maintenance organizations (HMOs) into the Medicare risk program than earlier analyses. Based on a diversification framework, this study examines new market entry from three dimensions: attractiveness of the market, market area attributes, and organizational attributes. The analysis uses a 1994-1995 cross-sectional, lagged time sample with 440 HMOs that did not have a Medicare risk contract as of January 1994; it defines an HMO's market as its service area. HMO enrollment growth in the market, individual HMO enrollment size, and adjusted average per capita cost (AAPCC) rates are found to be significant in predicting new market entry.