Allan Baumgarten's Managed Care Reviews

COLORADO

August 25, 2010

Colorado Health Market Review 2010 reports:

Hospital profits soar in 2009;

Medicare HMOs grow and are strongly profitable

(Denver) Denver-area hospitals nearly doubled their pre-tax profits in 2009, but the economic downturn is reducing inpatient utilization. HMO profitability was high, particularly for Medicare Advantage plans, and more seniors have enrolled in HMOs.

Colorado Health Market Review 2010, released here today, includes these findings and others. This is the 16th annual edition of Allan Baumgarten?s analysis of trends and issues in Colorado?s health care markets, first published in 1994. Baumgarten is an independent analyst and researcher on health finance in local markets who has also published annual market reports in Arizona, California, Florida, Illinois, Kentucky, Michigan, Minnesota, New York (co-author), Ohio, Texas and Wisconsin.

In this new report, Baumgarten finds:

Denver area hospital systems enjoyed their highest profits in years in 2009

Based on an analysis of hospital cost reports submitted to Medicare, hospitals in the Denver area had pre-tax net income of $742.4 million, or 12.9% of net patient revenues in 2009. HealthOne/HCA is the largest and most profitable system in the region; HealthOne had net income before taxes of $367.3 million in 2009, or 20.9% of net patient revenue. The Centura hospitals in the Denver area had net income of $70.7 million (7.0%) while the three Exempla hospitals had net income of $65 million, or 7.1% of net patient revenues. Of the three new suburban hospitals, HealthOne Sky Ridge and Parker Adventist, had very strong results but Exempla Samaritan posted a small loss.

While profitability was strong, inpatient hospital days in the region declined slightly in 2009. Unemployment has nearly doubled and the weakened economy means that fewer people still have comprehensive health benefits, which will likely reduce patient volumes.

In 2009, Colorado HMOs had net income of $127 million, 3.2% of underwriting revenues.

HMO profits declined by almost $100 million compared to 2008 because of much smaller profits on employer group plans. However, Medicare Advantage plans for Kaiser Permanente and PacifiCare reported $143 million in underwriting net income. Anthem Blue Cross Blue Shield of Colorado and New Mexico reported net income of $102.1 million in 2009, down from $114.6 million in 2008.

After eight years of steady decline, enrollment in Colorado HMOs increased slightly in 2009.

Enrollment of employer groups continued to drop, but HMO plans for Medicare and Medicaid added new members in 2009.

Average premium revenues from employer groups increased by 6.2% in 2007. Medical expenses for those groups grew by 11.8%, resulting in much lower profits.

In 2009, HMOs collected an average of $317 per commercial member per month, an increase of 6.2% over the 2008 average of $299. Colorado employers paid an average of $53 more per member per month for HMO premiums in 2009 compared to 2005. Medical expenses increased by 11.8% in 2009

Excerpts from the report, including the popular "Colorado HMOs at a Glance" page can be viewed at http://www.AllanBaumgarten.com. Copies of Colorado Health Market Review 2010 can be ordered from Allan Baumgarten for $160.00. Orders can be placed at his website or by calling 952/925-9121, faxing 952/925-9341 or sending E-mail to: Baumg010@tc.umn.edu

COLORADO