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Wisconsin Health Market Review 2010
Allan Baumgarten, June 2009
Wisconsin Health Market Review 2010 finds:
HMO Enrollment Reaches New High as Medicaid and Medicare Grow Rapidly;
Hospitals Boost Profitability in 2009 Even as Utilization Declines
(Milwaukee/Madison) Wisconsin hospitals reported strong profits in 2009 even though their inpatient hospital days declined slightly. And the state's HMOs now have more enrollees than at their previous peak in 2001.
These findings and others are included in Wisconsin Health Market Review 2010, Allan Baumgarten's seventh 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 has published annual market reports 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.
This report finds:
- Inpatient hospital utilization declined in 2009 in southeast Wisconsin and Madison even as those hospitals enjoyed strong profits. Although three new hospitals have opened in the past year just in the Milwaukee area, inpatient utilization went down in 2009 by about 35,000 days or 3%. In the Madison area, the decrease was smaller, 6,200 days or 1.8%. The decline reflects one of the key challenges that hospitals face for the next three years, namely more people deferring care because of losing their health benefits or moving to high deductible plans.
- Hospitals in Milwaukee and surrounding counties had net income of $558 million, or 9.3% of patient revenues in 2009. That is up from only $54.9 million in 2008, or 1% of net patient revenues. In that year, non-operating losses at several hospitals hurt overall profitability, although the Aurora system increased its profits that year. Madison-area hospitals also had strong results in 2009, with net income of $164.3 million or 8.4% of patient revenues.
- Through mergers and acquisitions, provider systems in the state have gained significant market power. The Affordable Care Act creates new opportunities for provider organizations to form Accountable Care Organizations (ACOs) for Medicare. And while two Milwaukee area provider groups have announced plans to work together on an ACO, other provider systems are watching and waiting to see if the opportunities for rewards will justify the required investment.
- Medicaid and Medicare enrollment in HMOs has grown sharply in the past five years and overall enrollment is now the highest in the state's history. Overall enrollment grew by 10% in 2009 and again by 3.3% in the first half of 2010, reaching 1.7 million HMO members. The previous high was 1.64 million in 2001. The growth has come in the state's Medicaid/BadgerCare programs. Medicaid HMO enrollment grew from 404,000 in 2007 to 685,000 in June 2010. And the new expansion authorized by the Affordable Care Act could increase Medicaid enrollment in Wisconsin by 20%, with many of them going into HMOs.
- Employer use of HMOs has dropped sharply in the past ten years, especially in southeast Wisconsin. In places like Appleton, LaCrosse, Madison and Marshfield, where many HMOs are owned by provider systems, health plans and employers are still using HMOs. In the Milwaukee area, however, Compcare (part of Anthem Blue Cross Blue Shield), Humana and UnitedHealthcare (once the largest employer HMO in the state) have encouraged employers to move into PPOs, Most now self-insure their benefits and have increased enrollee cost sharing through high deductibles.
- Wisconsin HMO profits were strong in 2009 and stronger in the first half of 2010. Wisconsin HMOs had net income of $148.1 million in 2009 (2.3% of revenues) and then $104.2 million (3% of revenues) through June 2010. UnitedHealthcare, now the largest HMO in the state, and Security Health Plan, owned by the Marshfield Clinic, were the most profitable HMOs in 2009. HMOs were profitable in all major lines of business that year - commercial, Medicaid and Medicare.
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