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Michigan Health Market Review 2019, Part Two

  • ID: 5025055
  • Report
  • May 2020
  • Region: United States
  • Allan Baumgarten
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After Enjoying Stronger Financial Results for Three Straight Years, Net Income for Detroit Area Hospitals Dropped Sharply in 2018

FEATURED COMPANIES

  • Ascension/St. John
  • Beaumont Health
  • Blue Cross Blue Shield
  • Henry Ford Hospital
  • McLaren Health
  • Spectrum Health
  • MORE

After three years of steadily increasing profits, Michigan hospitals saw a sharp decline in their net income and margins in 2018. The state's health insurers, led by Blue Cross Blue Shield and its HMOs, enjoyed much-improved profits in the first nine months of 2019.

Part Two of Michigan Health Market Review 2019 analyzes the financial results, inpatient utilization trends, and competitive strategies for the major hospitals and health systems in the state. Using Medicare cost reports from 2018 operations and other sources, the report contains detailed data by hospital and system on hospital finances and inpatient utilization for all general acute care hospitals in Detroit and suburbs and 66 hospitals in the rest of the state. The new report also updates enrollment and profitability data for Michigan health plans through September 2019.

Among the findings in the new report:

Hospital systems continue to expand through acquisitions and capital investment, although some projects are on hold as they deal with the COVID-19 pandemic. Beaumont Health is pausing its acquisition of Summa Health in Ohio, while McLaren Health is buying a hospital near Toledo. The University of Michigan hit pause on its $920 million expansion in Ann Arbor.
 
After enjoying stronger financial results for three straight years, net income for Detroit area hospitals dropped sharply in 2018. In 2018, these hospitals had a combined net income of $418.8 million or 3.4% of net patient revenues of $12.391 billion. That was down from a net income of $694.5 million in 2017, which was 5.6% of net patient revenues. This was the first time in five years that their net income fell below a half-billion dollars. Beaumont Health, with 30% of the market, reported a net income of $261.8 million, down from $293 million in 2017. The Henry Ford hospitals lost about $14 million, while the Ascension/St. John hospitals saw their net income drop from $134.4 million in 2017 to a loss of $128.3 million, due to a major loss at the Providence hospitals.

Net income for hospitals in other parts of the state dropped by $1 billion in 2018, after increasing by about 35% in 2017 and 32.3% in 2016. In 2018, hospitals outside of the Detroit area had net income of  $435.7 million, or 2.5% of net patient revenues. That was down from $1.488 billion in 2017, or 8.6% of net patient revenues, and $1.104 billion in 2016. Their operating losses doubled to $1.153 billion in 2018. Net income was down for several large systems. For the University of Michigan Health (including the MidMichigan hospitals), it dropped from $416.9 million in 2017 to $305.9 million in 2018. Net income for Spectrum Health was flat at $126.6 million, but the Trinity Health hospitals saw their net income drop from $333.7 million in 2017 to a loss of $239.5 million in 2018, mostly from a large reported loss at St. Mary's in Grand Rapids.

Inpatient hospital days decreased again in 2018. Detroit-area hospitals provided about 30,000 fewer inpatient days in 2018 compared to 2017. Inpatient utilization has dropped steadily since it peaked in 2007 when Detroit-area hospitals provided 2.5 million days of inpatient care. The number of inpatient days covered by Medicaid increased from 473,000 in 2013 before Michigan expanded Medicaid eligibility to 549,000 in 2018. While Medicaid expansion improved hospital revenues and net income, hospitals are more vulnerable to proposed cuts in Medicare and Medicaid, which pay for nearly 80% of inpatient days in Detroit-area hospitals.

20 Michigan provider organizations participate in the Medicare Accountable Care Organization program, and some of them earned significant shared savings. In 2018, Michigan ACOs in the Shared Saving Program had 422,500 aligned beneficiaries and earned shared savings of $60.7 million, with three ACOs earning more than $15 million.

Led by Blue Cross Blue Shield and its HMOs and Priority Health, Michigan health insurers reported increased profits in the first three quarters of 2019. Through September 2019, Michigan HMOs had a net income of $514.3 million, or 3.9% of revenues, up from $410 million for the same period in 2018. Blue Cross Blue Shield improved its net income from $648 million to $719.5 million. Enrollment in Medicaid managed care plans dropped by about 27,000 in the first nine months of 2019.

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FEATURED COMPANIES

  • Ascension/St. John
  • Beaumont Health
  • Blue Cross Blue Shield
  • Henry Ford Hospital
  • McLaren Health
  • Spectrum Health
  • MORE

1. Introduction

2. Market Structure

3. Market Analysis

4. Detroit Area Hospitals

  • Revenues and Net Income
  • Inpatient Occupancy and Payer Mix
  • Performance Bonuses and Penalties

5. Other Major Hospitals

  • Revenues and Net Income
  • Inpatient Occupancy and Payer Mix
  • Performance Bonuses and Penalties

6. Health Plan Trends

  • HMOs Hospital Admissions
  • Health Plan Enrollment and Net Income
  • Medicaid Enrollment by Region
  • Effectiveness and Utilization of Care

7. A Look Ahead

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  • Ascension/St. John
  • Beaumont Health
  • Blue Cross Blue Shield
  • Henry Ford Hospital
  • McLaren Health
  • Spectrum Health
  • St. Mary's
  • Summa Health
  • Trinity Health
  • University of Michigan
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