The past decade has seen a significant shift in the US healthcare industry as managed care segments gained market share at the expense of other healthcare organizations. This shift helped produce such value-creation winners as health maintenance organizations (HMOs) and pharmacy benefit managers (PBMs), which delivered $40 billion and $15 billion, respectively, to shareholders between 1983 and 1993.

But as the industry continues its transformation, new winners are emerging. Collectively, the 15 largest competitors in 1993 increased their economic value by only 7 percent in each of the following two years. The main reason was the sub-par value-creation performance of some of the largest HMOs and the indemnity insurers. In comparison, HBO, HealthSouth Corporation, and Oxford Health Plans—three examples of a remarkable surge by smaller healthcare competitors—tripled their total economic value in 24 months. For all the focus on the acquisition-driven growth of larger competitors such as United HealthCare/MetraHealth, the industry as measured by the market value of public companies is fragmenting, not consolidating.

How they created value

Analysis of the new value creators in healthcare reveals the continuing importance of strong medical cost management skills, collaborative relationships with other healthcare participants, and a performance-oriented organizational culture that strives...