With fewer insured patients, many Texas hospital systems saw their strong recent profits decline in 2017. And while HMO enrollment reached record highs in 2017, Texas HMOs lost money as a group, even on their usually profitable Medicaid plans.
These and other findings are reported in Texas Health Market Review 2018, this report analyzing insurers and hospital systems in the Texas health care market. The report analyzes strategies and competition for health insurers and provider systems in Texas, examining the impact of the Affordable Care Act and other developments driving changes in the market.
The new report finds:
- Profitability declined for many Texas hospital systems. In Houston, pre-tax net income for hospitals was $1.827 billion in 2017 or 8.4% of their net patient revenues. That was down 18.7% from net income of $2.246 billion in 2015 when they posted an average margin of 11.1%. Hospitals have benefited from a growth in insurance coverage in the state, seeing fewer uninsured patients, but the number of uninsured began to grow again in 2017. In the Dallas-Fort Worth area, average hospital margins dropped from 14.1% in 2015 to 12.7% in 2017, as combined net income decreased from $2.597 billion to $2.54 billion. Net income also decreased for Austin-area hospitals, with average margins declining from 16.5% in 2015 to 13% in 2017.
- Hospital systems remained focused on growth, and are expanding through acquisitions, new construction, partnerships and adding new convenient care sites. The Baylor Scott & White system, already the second largest in the state, proposes to merge with the Memorial Hermann system in Houston, creating the state’s largest hospital system. Hospital systems continue to merge and expand, giving them significant power to demand higher payment rates from insurers. That merger may be the first of non-overlapping systems to get significant scrutiny from antitrust regulators.
- HCA Healthcare, currently the largest system in the state, rebranded its north Texas hospitals with the name of its very profitable Medical City hospital. Some other systems are shrinking, including Tenet Health, which sold off its Houston and North Texas hospitals. Many systems have added new urgent care clinics and freestanding emergency rooms to expand their geographic reach.
- Although the major systems continue to invest in new facilities, the growth of inpatient utilization has slowed. Inpatient days provided by Houston hospitals have grown less than 1% in the past two years, while hospital days increased by less than 2% for Dallas-Fort Worth hospitals in two years.
- As a group, Texas HMOs lost $18.2 million in 2017, compared to net income of $432.8 million in 2015. While Medicaid HMOs like Amerigroup and Superior HealthPlan posted strong profits, HMO Blue Texas (part of Blue Cross Blue Shield) lost $109.5 million and Texas Children’s Health Plan lost $40.6 million. The HMOs of UnitedHealthcare, now the largest insurer in the state, had combined net income of only $32.7 million, down from $161.3 million in 2015.
- Growth of Medicare Advantage HMO plans slowed in 2017 but they remain their most profitable line of business. About 800,000 seniors were in Medicare plans in 2017, up from 765,000 in 2015, and UnitedHealthcare’s HMOs enroll more than a 40% of them. While they remain profitable, underwriting income for Medicare plans dropped from $413.7 million in 2015 to $259.6 million in 2017.
- Medicaid HMOs lost $193 million in 2017. They reported operating income of $69.1 million in 2015, down from $131.9 million in 2013. Four Medicaid HMOs - Children’s Medical Center Health Plan (Dallas), UnitedHealthcare Community Plan, Texas Children’s Health Plan and HMO Blue Texas - posted large losses, though Amerigroup and Superior HealthPlan maintained their profits.
- Enrollment in Texas HMOs grew by 3.3% in 2017, reaching 5.5 million, a record high for the state. About 3.1 million Medicaid recipients are now enrolled in HMOs, up from 2.9 million in 2015. Enrollment in HMO individual plans grew from 415,000 after the first open enrollment in 2014 to 883,000 in 2016 but has since dropped to 822,000 in March 2018.
- While individual enrollment has increased sharply with the 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.
2. Market Structure
- Health Plans
- Hospital Systems
3. Trend Review
- Health Plan Enrollment
- Individual PLans and HealthcareGov
- Medicaid Managed Care and CHIP
- Medicare Plans
- Enrollment and Market Share by Region
- Health Plan Net Income
- Financial Results 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