February 4, 2013
Wisconsin Health Market Review 2012 finds:
HMO Profitability Slips Even as Enrollment Rises;
Hospitals Maintain Profitability Even as Utilization Declines;
Implementation of Health Reform Creates New Opportunities and Challenges
(Milwaukee/Madison) Wisconsin providers and health plans are busily preparing for implementation of health reform, even as the state's plans remain unclear. Profitability for both hospital systems and health plans remains strong, even though it has declined in the past two years. Enrollment in HMOs continues to increase while inpatient days in Wisconsin hospitals have declined.
These findings and others are presented in Wisconsin Health Market Review 2012, Allan Baumgarten's eighth report analyzing key trends in Wisconsin?s health markets. The report is released here this week. Baumgarten is an independent analyst and consultant on health policy and finance based in Minneapolis. He has published reports analyzing health insurance and provider markets in Wisconsin and ten other states: Arizona, California, Colorado, Florida, Illinois, Kentucky, Michigan, Minnesota, Ohio and Texas. He also contributed the data analysis to studies of New York health insurance markets published by the United Hospital Fund.
In the new report, Baumgarten finds:
• Inpatient hospital days in southeast Wisconsin have dropped by 9% in the past five years.
The 30 hospitals in the region, four of which are less than five years old, delivered about 9% fewer inpatient days in 2011 compared to 2006. And while they reported a small increase in 2011, future declines are very possible, given the fact that fewer people have comprehensive health benefits and are deferring care.
• Hospitals in Milwaukee and surrounding counties had net income of $504.4 million in 2011, or 7.7% of net patient revenues.
While still quite strong, that is less than the results in 2009, their best recent year, when they recorded net income of $558 million, or 9.3% of patient revenues. Madison-area hospitals also had strong results in 2011, with net income of $159.7 million, or 7.5% of net patient revenues of $2.124 billion, though their margins were also narrower than in 2009.
• Mergers and acquisitions have created powerful provider systems in both southeast Wisconsin and in other parts of the state.
Systems like Ministry Health, Mayo Clinic and Hospital Systems Health System have extended their size and geographic presence. Seven provider systems in the state have formed Accountable Care Organizations for Medicare that will seek to better coordinate care and improve quality. They include Bellin/ThedaCare in the Fox Valley, Aurora Health and ProHealth, and these entities will share the savings that result with Medicare. The two newest ACOs were formed by the University of Wisconsin Health System and the Marshfield Clinic, which was very successful in an earlier shared savings demonstration for Medicare.
• Five years of HMO enrollment gains could be wiped out by the termination of Medicaid HMO contracts in 2012.
Enrollment in HMOs grew by almost 4% in 2011, approaching 1.8 million or 31% of the state?s population. That was on top of 2010 gains of 3.3%. Most of the growth was in Medicaid/BadgerCare managed care plans. However, UnitedHealthcare terminated its major Medicaid contract for southeast Wisconsin and up to 174,000 enrollees could return to fee-for-service Medicaid, wiping out most of the enrollment gains of the past five years. Governor Walker is expected to announce in February whether Wisconsin will expand Medicaid eligibility under federal law. That decision is important to the estimated 181,000 persons who could gain Medicaid benefits and to Wisconsin's safety net providers, who face a loss of millions in federal hospital funds over the next five years.
• Wisconsin HMO profits have declined since their peak in 2009.
Wisconsin HMOs had net income of $109.1 million in 2011, or 1.5% of underwriting revenues. That compares to $119.8 million in 2010 and $148.1 million in 2009 (2.3% of revenues). Compcare (Blue Cross Blue Shield?s HMO), the fourth largest HMO in the state, had the highest profits, followed by Security Health Plan, owned by the Marshfield Clinic. While HMOs were profitable in all major lines of business in 2011 - commercial, Medicaid and Medicare - their Medicaid profits dropped from $53.5 million in 2009 to $4.7 million in 2011.
Excerpts from the report, including the "Wisconsin HMOs at a Glance" page can be viewed at http:// . Copies of Wisconsin Health Market Review 2012 can be ordered for $160.00 at Baumgarten's website, by calling 952/925-9121, faxing 952/925-9341 or sending E-mail to: Baumg010@tc.umn.edu