Bolstered by strong profitability, Texas hospital systems are pursuing a variety of strategies to gain market share, including acquisitions, partnerships and new facilities. However, inpatient utilization is flat or increasing slowly in much of the state. Texas health insurers have added a million Medicaid and individual members in the past two years, but large losses by a few insurers broke a streak of strongly profitable years.
These and other findings are reported in Texas Health Market Review 2016, our 14th report analyzing insurers and hospital systems in the Texas health care market. He first published a Texas market study in 1998. The report analyzes strategies and competition for health insurers and provider systems in the state, examining the impact of the Affordable Care Act and other developments driving changes in the market.
The new report finds:
- Texas hospitals continue to enjoy strong profitability. As hospitals form larger systems and expand their geographic reach, they have reported strong and, in some cases, growing profits. For example, hospitals in the Dallas-Fort Worth area had net income of $2.597 billion in 2015, or 14.1% of net patient revenues. That compares to net income of $1.998 billion in 2013, which was 12.1% of net patient revenues.
- They have had average margins above 12% for five of the last six years. Two hospital systems – HCA and BaylorScott&White -- had margins above 18% in 2015. Houston-area hospitals reported average margins of 11.1% of net patient revenues in 2015, down from average margins of 12.5% in 2014. The HCA hospitals in the area reported an average margin of 22.7% pre-tax, and the Memorial Hermann hospitals had a margin of 10.5%.
- Hospitals are expanding through acquisitions, partnerships and adding new convenient care sites. HCA has hospitals in all four major metropolitan areas and in other parts of the state, and is rebranding its north Texas hospitals. The new BaylorScott&White Health system has significant market power in the Interstate 35 corridor from Dallas-Fort Worth to Austin. Tenet Health acquired Baptist Health in San Antonio, giving it a strong presence there and in other regions, including El Paso. Christus Health has acquired hospitals in east Texas, and the University of Texas is adding new hospitals and medical schools in Austin and the Rio Grande Valley.
- Many systems have added new urgent care clinics and freestanding emergency rooms to expand their geographic reach. Texas hospitals partnered with nationally known providers like the Cleveland Clinic and the Mayo Clinic and market the ease of getting high quality care close to home. In Dallas, Methodist Health joined the Mayo Clinic Care Network, and Baylor Health is now part of the Cleveland Clinic’s national cardio-vascular care network. University of Texas MD Anderson Cancer Center has expanded by establishing satellite centers in Florida, New Jersey and Arizona.
2. Market Structure
3. Health Plans
4. Hospital Systems
5. Trend Review
6. Health Plan Enrollment
6.1 Individual PLans and Healthcare.Gov
7. Medicaid Managed Care and CHIP
8. Medicare Plans
9. Enrollment and Market Share by Region
10. Health Plan Net Income
11. Financial Results by Line of Business
12. Administrative Expenses and Provider Payments
13. HMO Capital
14. Regional Markets and Hospital Systems
14.1 Dallas-Fort Worth
14.4 San Antonio
14.5 Other Major Hospitals
15. A Look Ahead
- Although the major systems are making large investment in new facilities, growth of inpatient utilization has slowed. For example, Houston area hospitals have expanded and provided 300,000 more inpatient days in 2015 compared to 2013. On an average day in 2015, 70.3% of inpatient hospital beds in Houston were full compared to 67.4% in 2013.
- Health plans like UnitedHealthcare, CIGNA HealthSpring and Amerigroup continued their strong profits, but HMO Blue Texas and Humana reported large losses.
- Medicare Advantage HMO plans continue to grow and have been the most profitable line of business for HMOs. At the end of 2015, about 765,000 seniors were in Medicare plans, with more than a third of them in UnitedHealthcare’s very profitable senior plans. They had operating income of $413.7 million in 2015.
- Medicaid HMOs were less profitable in 2015 compared to 2013. They reported operating income of $69.1 million in 2015, down from $131.9 million in 2013.
- Enrollment in Texas HMOs increased by 1 million lives from 2013 to 2015, due to growth in Medicaid and individual plans. About 2.9 million Medicaid recipients are now enrolled in HMOs, up from 2.4 million in 2013. Enrollment in HMO individual plans grew from 415,000 after the first open enrollment in 2014 to 883,000 in 2016.
- While individual enrollment has increased sharply with implementation of the Affordable Care Act, several insurers have dropped out of that market segment. After showing early promise for new competition and low premium increases, only three or four insurers are selling individual plans on the Healthcare.gov exchange in the largest metropolitan areas.