January 14, 2016
Ohio Health Market Review 2015 finds:
Consolidated hospital systems pursue expanded networks,
maintain profits even with fewer inpatient days;
Medicaid and individual enrollment in HMOs surges and Medicaid is strongly profitable
–Ohio hospital systems continue to expand through mergers, acquisitions and new construction and there are now five systems in the state with 2014 revenues above $2.5 billion. Their profits are strong, even though inpatient days continue to decline in Cincinnati and Cleveland. Ohio health insurers have added about 800,000 Medicaid recipients and individual insureds, and but their overall profits declined in 2013 and 2014.
These and other findings are presented in Ohio Health Market Review 2015,
Allan Baumgarten’s 13th report analyzing health care insurance and provider markets in Ohio. The report examines data on health plans and hospital systems in Ohio, putting that analysis in the context of provider system consolidation and implementation of the Affordable Care Act. Baumgarten, an independent analyst based in Minnesota, has published his Ohio market analysis since 1997. He has also published market studies in 11 other key states.
In the new report, Baumgarten finds:
• Hospital profitability in the three largest metropolitan areas improved sharply in 2013 and 2014.
Using data from Medicare hospital cost reports, the report shows Cincinnati area hospitals had combined net income of $645.1 million in 2014, or 10.4% of net patient revenues. Christ Hospital and the Tri-Health and the St. Elizabeth systems had the strongest margins. By comparison, the average margin was 8.5% in 2012. Cleveland-area hospitals had especially strong margins in 2013, averaging 12.2%, but that dropped to 9.6% in 2014, or net income of $978.9 million. Still that was higher than 2012 net income of $852.9 million, or 9.1% of net patient revenues. Comparing the three metropolitan areas, Columbus hospitals reported the strongest margins in 2014. They had net income of $992 million, or 13.6% of patient revenues. That is up from $776 million (12.4%) in 2012. Nationwide Children’s had a margin of 26% in 2014, and the other systems all posted strong results.
• Although their profitability is strong, inpatient days dropped again for hospitals in the Cincinnati and Cleveland areas.
Ohio hospitals continue to make significant capital investments in new facilities, even though inpatient days have dropped for many of them in recent years. For example, inpatient days for Cleveland hospitals dropped by about 1% in 2014, and the average inpatient occupancy rate has dropped from 69.6% in 2008 to 64.7% in 2014. (The decline was less steep in Cincinnati: from 68.7% to 67.4% in 2014.)
• Medicaid and individual enrollment has grown sharply in the past 18 months.
Enrollment in Medicaid HMOs reached 2.4 million in 2014, though it dropped slightly in the first half of 2015. That growth includes over 500,000 recipients added under the eligibility expansion of the Affordable Care Act, which the Kasich administration implemented over legislative opposition. In addition, the state has begun extending managed care to aged and disabled recipients. Enrollment in individual HMO plans grew by almost 100,000 in 2014 and continues to grow. New entrants like CareSource and Ambetter/Buckeye as well as Medical Mutual’s HMO have added the most new members.
• Although enrollment has grown, HMO profitability declined in 2013 and 2014.
Ohio HMOs had net income of $171.2 million in 2014, or 1.1% of premium revenues. That is less than their margin of 2.0% in 2013 and 2.5% of underwriting revenues in 2012. While HMOs lost money on their commercial plans, Medicaid was the most profitable line of business in 2014, with CareSource, Molina Healthcare and UnitedHealthcare all posting very strong profits. CareSource, the largest HMO in the state, had underwriting income of $108.3 million for Medicaid. UnitedHealthcare had underwriting income of $31.3 million for Medicare, but several of the other Medicare plans lost money in 2014. Anthem Blue Cross Blue Shield had 2014 net income of $$276.9 million, for a margin of 5.2%. That was less than 7.3% in 2012. Medical Mutual had a margin of 4.3% in 2014.
Excerpts from Ohio Health Market Review 2015
, including the popular “Ohio HMOs at a Glance” exhibit can be viewed at http://www.allanbaumgarten.com/ohio.php
Copies of the report,
published in interactive PDF format, can be ordered for $160.00 at the website or by calling Baumgarten at 952-925-9121, Fax: 952-925-9341, E-mail: Baumg010@tc.umn.edu