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OBJECTIVE: To assess the impact of HMO market structure on the formation of physician-hospital strategic alliances from 1993 through 1995. The two trends, managed care and physician-hospital integration have been prominent in reshaping insurance and provider markets over the past decade. STUDY DESIGN: Pooled cross-sectional data from the InterStudy HMO Census and the Annual Survey conducted by the American Hospital Association (AHA) between 1993 and the end of 1995 to examine the effects of HMO penetration and HMO numbers in a market on the formation of hospital-sponsored alliances with physicians. Because prior research has found nonlinear effects of HMOs on a variety of dependent variables, we operationalized HMO market structure two ways: using a Taylor series expansion and cross-classifying quartile distributions of HMO penetration and numbers into 16 dummy indicators …