Texas hospital systems enjoyed strong margins but their inpatient hospital days are flat or even declining. HMOs also reported strong profits, and their growing Medicare plans are now their most profitable line of business. More than 700,000 Texans selected a plan on Healthcare.gov and two HMOs added 470,000 individual members.
Texas Health Market Review 2014 finds:
- Hospitals form statewide systems, strategic affiliations
- Hospital profitability remains very strong, but inpatient use is flat
- HMOs gained nearly half a million individual members in 2014
These and other findings are reported in Texas Health Market Review 2014, the 13th report analyzing insurers and hospital systems in the Texas health care market. This Texas market study, which was first published in 1998, analyzes strategies and competition for health insurers and provider systems in the state, in the context of health reform and other developments driving changes in the market.
The new report finds:
- Hospitals continue to enjoy strong and growing profitability. As hospitals form larger systems and expand their geographic reach, they have been able to maintain strong or even improved profits. For example, hospitals in the Dallas-Fort Worth area have had average margins above 12% for three of the last four years. They had net income of $1.998 billion in 2013, which was 12.1% of net patient revenues. That is down from $2.034 billion in 2012, or a margin of 12.7%. HCA was the most profitable, followed by Baylor Health, now part of a merged system with Scott & White. Houston-area hospitals reported average margins of 11.1% of net patient revenues in 2013, down from 11.6% in 2012. Austin area hospitals reported net income of $531.5 million, or 13.4% of net patient revenues, though that was less than their results in 2012.
- Mergers and other strategic partnerships are changing the market for provider systems in the state. While HCA Healthcare already has hospitals in much of the state, a series of recent mergers, acquisitions and new construction means that four more hospital systems are getting closer to a statewide presence. The new BaylorScott&White Health system has significant market power in the I-35 corridor from Dallas-Fort Worth to Austin. Tenet Health’s acquisition of the Vanguard Health hospitals, including Baptist Health in San Antonio, gives its broader strength here. Two Dallas hospital systems have affiliated with prestigious national provider systems as part of a broader marketing and quality improvement strategy. Methodist Health has joined the Mayo Clinic Care Network, and Baylor Health is now part of the Cleveland Clinic’s national cardio-vascular care network.
- Although the major systems are making large bets on new facilities, rates of inpatient utilization have slowed and even fallen in some areas. For example, there are 940 more inpatient beds in acute care hospitals in the Houston area than in 2007. Data from the state’s annual hospital survey for 2013 shows that the number of inpatient days is virtually the same. On an average day in 2013, 65% of inpatient hospital beds were full compared to 67.7% in 2007.
- After increasing for four straight years, HMO enrollment in the state fell in 2013 as Medicaid and CHIP plans lost members. However, Medicaid enrollment resumed its growth in the first six months of 2014.
- More than 740,000 Texas selected insurance coverage through the Healthcare.Gov exchange, and two HMOs, HMO Blue Texas and Humana, added more than 470,000 individual customers. The new exchanges and the availability of subsidies for qualifying individuals have transformed the market for individual insurance. The entrance of new competitors to the exchange and the moderate increases in price (and some decreases) are evidence that the individual market is functioning much better than in the past.
- Medicare Advantage HMO plans have grown at double digit rates and have been the most profitable line of business for HMOs. Nearly 600,000 Texas seniors are now in HMO plans, and 400,000 are in other Medicare Advantage plans, UnitedHealthcare’s senior plans (formerly known as Secure Horizons) are the largest with 244,000 seniors, and the most profitable, with operating income in 2013 of $278 million. The average operating margin for those plans was 6.6% and the average medical loss ratio was 84%.
- Medicaid HMOs improved their financial results in 2013 and reported $132 million in underwriting income in 2013. By comparison, they had operating losses of $74.3 million in 2012. While Texas has expanded its use of managed care for aged and disabled Medicaid recipients, creating a significant business opportunity for HMOs, it will not expand eligibility for Medicaid under the Affordable Care Act. By some estimates, implementing an expansion would reduce the number of uninsured by up to 1.3 million in the next five years and bring billions of dollars to providers in the state. SHOW LESS READ MORE >
2. Market Structure
- Health Insurers
- Hospital Systems
3. Trend Review
- Health Plan Enrollment
- Medicaid Managed Care and CHIP
- Medicare Plans
- Enrollment and Market Share by Region
- Health Plan Net Income
- Financial Metrics by Line of Business
- Administrative Expenses and Provider Payments
- HMO Capital
4. Regional Markets and Hospital Systems
- Dallas-Fort Worth
- San Antonio
- Other Major Hospitals
5. A Look Ahead