Michigan Health Market Review 2024

Consolidation Creates Hospital Systems with Significant Market Power. Profitability Improved in 2023 for Detroit-Area Hospitals, But Declined for Systems in Other Parts of State.

First published in 1997 and now in its 28th year, Michigan Health Market Review analyzes the health care payer and provider markets in the state. The reports provide a comprehensive and objective analysis of strategies and key trends for the health insurers and provider systems in Michigan.

Part 1 presents analysis of the health insurers, their financial performance, enrollment and market share. The data shows the impact of the “Great Unwinding” of Medicaid recipients beginning in June 2023 and how Michigan HMOs were impacted.

Part 2 discusses the health systems, their financial results and their inpatient occupancy and payer mix based on 2020 data.

The reports also include an extended analysis of implementation of key elements of the Affordable Care Act in the state, including Medicaid expansion, Medicare Accountable Care Organizations and developments in the individual market.

Key findings in Part 1:

• After growing by 275,000 lives between the end of 2020 and June 2023, enrollment in Medicaid HMOs has now fallen by 336,000 lives, or 16.4% through the first quarter of 2024. As in other states, Michigan’s Medicaid agency began a process of reviewing current eligibility for the 3 million beneficiaries in the state, about 90% of whom are in managed care plans. For example, enrollment in Meridian’s Medicaid plans dropped by more than 121,000 or 21.7% since the end of 2022.
• Based on an average premium of $346 per member per month, Medicaid HMOs could see their revenues reduced by $1.4 billion in 2024. That likely also means less revenue for hospitals and clinics, especially safety net providers that see a high number of patients covered by Medicaid or uninsured.
• While Medicaid enrollment has decreased, health plans have seen enrollment in individual plans and Medicare Advantage plans grow sharply in the past 15 months. In the first quarter of 2024, enrollment in individual health plans increased by 21.7%, with Meridian Health adding 32,000 new enrollees and Priority Health gaining almost 17,000.
• Medicare Advantage plans have enjoyed steady growth in recent years and added almost 108,000 members in 2023. Three Humana companies added 35,000 members in Michigan, and three UnitedHealthcare companies added almost 24,000 lives. However, Medicare Advantage plans, both for seniors and persons dually eligible for Medicaid and Medicare, reported combined losses of $190 million. Blue Cross Blue Shield Mutual alone lost $142 million in 2023, while four HMOs - Aetna, Blue Care Network, Physicians Health Plan and Priority Health - reported large losses.
• The growth of Medicare Advantage enrollment has implications for hospital systems and physicians. Those plans are notorious for limiting provider payments and using prior authorization to limit care.
• Combined net income for Michigan HMOs dropped from $542 million in 2022 to $456.9 million in 2023., which was 1.8% of underwriting revenues of $25.817 The HMOs that were most profitable were Medicaid managed care plans UnitedHealthcare Community Plan and Molina Healthcare.
• By far, Medicaid was the most profitable line of business, with underwriting income of $253.7 million and combined underwriting income in the last four years of $945 million. Only one Medicaid HMO, HAP-CareSource, was not profitable in 2023.

Key findings in Part 2:

• Consolidation of hospital systems continues in Michigan, creating three very large systems, each with a presence in key parts of the state. Based on 2023 data, the combined Henry Ford-Ascension health system in southeast Michigan had $6.55 billion in net patient revenues or 44.8% of the local hospital market. The University of Michigan hospital system, now including the Sparrow hospitals in the Lansing area and building a close affiliation with MyMichigan Health, had 2023 net patient revenues of more than $7 billion. And Corewell Health, including the former Spectrum hospitals in west Michigan and the Beaumont Health hospitals in the Detroit suburbs, had net patient revenues of $7.769 billion in 2023.
• Hospitals in southeast Michigan improved their financial results in 2023, reporting combined net income of $202.2 million in 2023, or 1.4% of net patient revenues of $14.642 billion. That is up nearly $600 million from their combined loss of $379.7 million in 2022. The Corewell Health hospitals were the most profitable, with net income of $135.1 million. Corewell was the most profitable system in the area in each of the last 10 years. The Henry Ford hospitals (not including Ascension in 2023) improved their results from a loss of $277.6 million in 2022 to a net gain of $13.2 million in 2023.
• Staffed beds and inpatient days for these hospitals dropped again in 2023. Inpatient days dropped 5.4% during the first year of the COVID-19 pandemic and have not reached pre-COVID levels since. In 2023, the Detroit Medical Center hospitals provided 27,000 fewer days and the Corewell hospitals provided 15,000 fewer days. Some systems have downsized their inpatient bed capacity, so rates of inpatient occupancy have increased, reaching 71.1% in 2023. To some extent, recent acquisitions and other deals were driven by the desire of health systems to increase or maintain market share in a market where the pie is shrinking.
• Hospital systems in other regions of the state saw their combined net income drop by 90% in 2023, from $307 million to $32.1 million, a margin of only 0.1%. These hospitals had their best financial results in 2021, when they had net income of nearly $3 billion, or 13.7% of their net patient revenue. In 2023, profitable systems included Corewell Health (margin of 5.8%), Trinity Health (net income of $238.1 million or 9.1%), Bronson Healthcare (margin of 10.2%) and University of Michigan ($179.5 million or 2.6%). Systems posting large losses in 2023 included Ascension Health, which is in the process of withdrawing from the Michigan market (loss of $188.8 million, or 16.9%), McLaren Health (loss of $378.8 million, or 20%), and ProMedica (loss of $169.4 million or 47.6%).
• The number of inpatient days provided by these hospitals dropped by 10.4% in 2023. Three systems provided about 20,000 fewer inpatient days in 2023 compared to 2022: McLaren Health, Ascension and Trinity. A relatively high percentage of the population in these areas is 65 and older, and Medicare covered 52.8% of inpatient days in 2023. Medicaid paid for 26.3% of inpatient days, although the number of days covered by Medicaid dropped by 72,000, to 598,000. That roughly matches the decline in Medicaid enrollment in Michigan, which dropped by 22% between June 2023 and June 2024.