(Milwaukee/Green Bay) Wisconsin hospitals reported record profits in 2007 but face serious risks. HMOs gained enrollment for the first time since 2001.

    These findings and others are included in Wisconsin Health Market Review 2008, Allan Baumgarten's sixth annual report analyzing key trends in Wisconsin 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 publishes annual market reports in Wisconsin and ten other states: Arizona (new in 2008), California, Colorado, Florida, Illinois, Kentucky, Michigan, Minnesota, Ohio and Texas. GlaxoSmithKline provided support for his Wisconsin research.

    In this year's report, Baumgarten finds:

•     Hospitals in southeast Wisconsin and Madison enjoyed much higher profits in 2007.

    Hospitals in Milwaukee and surrounding counties had net income of $521.9 million, or 9.7% of patient revenues. That is up from $308.9 million (6.1%) in 2006, though part of the difference was due to $100 million in 2006 losses incurred winding down operations at St. Michael hospital.  Hospitals and physician groups in the area are going through a new stage of consolidation and system expansion, forming larger provider systems and constructing new suburban hospitals. Madison area hospitals increased their profit margins from 9.7% in 2005 to 10.2% in 2006 and to 11% in 2007.

    Still hospitals face very real risks, including a decline in patients and revenues because fewer people with health insurance and more people with insurance facing high deductibles. In addition, their investment income is down and their cost of borrowing is much higher.

•     After steadily declining for five years, enrollment in Wisconsin HMOs increased in the past 18 months.

    From a peak of 1.640 million enrollees in 2001, HMO enrollment declined sharply for five straight years. But it began to turn around in 2007 and has increased by 79,000 lives in the past 18 months. Most of the growth has been in Medicaid and BadgerCare, but commercial and Medicare Advantage enrollment has also increased.

    In the Milwaukee area, Compcare (part of Anthem Blue Cross Blue Shield), Humana and UnitedHealthcare (once the largest HMO in the state) have encouraged employers to move into PPOs and to self-insure their benefits and increase enrollee cost sharing through high deductibles. In Madison and other parts of the state, where many HMOs are owned by provider systems, health plans and employers are still using HMOs.

• Wisconsin HMOs had higher profits in the first half of 2008.

    Wisconsin's 24 HMOs had net income of $85 million in 2007 (1.7% of revenues) about the same as in 2006. UnitedHealthcare and Managed Health Services had the strongest profits.  HMOs lost money on employer group plans but did very well on their Medicaid and Medicare Advantage plans. In the first six months of 2008, HMOs increased their average profits margins to 2.7%.

•   HMO premium revenues increased by 7.1% in 2007 and are especially high in Milwaukee and in western Wisconsin.

    Average HMO premium revenues increased 7.1% in 2007, from $296 to $317 per commercial member per month. From 2002 to 2007, average premiums PMPM increased by almost $100, a hardship for employer struggling to remain competitive.

    Excerpts from the report, including the "Wisconsin HMOs at a Glance" page can be viewed at http://www.AllanBaumgarten.com. Copies of Wisconsin Health Market Review 2008 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