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Reports

January 5, 2021

 

Colorado health insurers increase enrollment and post record profits;

Hospitals profits decline in 2019 and 2020 but remain strong

 

            (Denver) In the first year of the COVID-19 pandemic, Colorado health insurers increased their enrollment by 10% and posted record profits. Even though hospital systems in the state saw their profits decrease in 2019 and 2020, Denver-area hospitals still had average pre-tax profit margins above 10%.

            These findings are reported in Allan Baumgarten’s Colorado Health Market Review 2021, released here today. This is the 21st edition of the report, which was first published in 1994. Baumgarten is a Minneapolis-based analyst and researcher who studies health care policy, finance and local markets. He publishes reports analyzing trends and strategies for health insurers and hospital systems in Colorado and five other states. He also conducts project research, such as his recent analysis of how states contract with Medicaid managed care organizations for the Robert Wood Johnson Foundation.

            Key findings in the new report:

  • After breaking records in 2018, Denver-area hospitals reported lower profits in 2019 and 2020.

            Based on financial data from Medicare cost reports, 28 Denver-area hospitals reported combined pre-tax net income in 2020 of $1.384 billion, or 11.4% of net patient revenues of $11.085 billion. That was down from net income of $2.104 billion in 2018 and $1.937 billion in 2019. In 2020, these hospitals had operating income of $246.2 million, a billion dollars less than in 2019. But they had other revenues of $1.084 billion, including several hundred million in COVID-19 Provider Relief Funds, as well as government grants, philanthropy and investment income.

            As in past years, the HealthONE-HCA hospitals were the most profitable, with average pre-tax margins of 24.4%, much less than 45.5% in 2018. The University of Colorado Health system is the largest in the state with net patient revenues from its hospitals of $4.348 billion. It had net income in 2020 of $629.7 million, or 14.5% of net patient revenues. About 62% of its net income was from its main hospital in Aurora, while its hospitals in Colorado Springs and Fort Collins accounted for most of the rest. Centura Health was the only large system that reported increasing its net income, from $258.8 million in 2018 to $359.6 million (11.5% of revenues) in 2020. The SCL Health hospitals reported net income of $112 million or 6.1%, down from 10.3% in 2018. SCL has announced plans to merge with Intermountain Healthcare, a large system based in Utah.

  • Hospital systems in Colorado have made significant investments in hospitals, emergency rooms and other facilities, yet inpatient utilization has been flat in the past three years for Denver-area hospitals. Hospitals in the Denver Metro area provided 1.278 million days of inpatient care in 2020, about the same as in 2018. Hospitals in other parts of the state provided about 4% fewer inpatient days in 2020 compared to 2019 and their average occupancy rate dropped to about 57%. The University of Colorado health system has grown to seven hospitals outside the Denver area, after acquiring or building five hospitals in the past five years.
  • Colorado HMOs increased their profits by 13% in 2020 to $662.3 million, more than in any previous year.

Profits were especially strong for individual, large group and Medicare Advantage plans. Kaiser Permanente improved its net income from $245.2 million in 2019 to $378.4 million or 9.2% of revenues in 2020. PacifiCare, a UnitedHealth Group company, posted net income of $205.9 million for its Medicare Advantage plans in Colorado, Arizona and Nevada. Blue Cross Blue Shield’s PPO plans had net income of $225.5 million, or 12.3% of revenues.

  • Additional claims for treating COVID-19 patients were more than offset by savings as hospitals suspended non-emergent surgeries and patients elected to defer care. Average medical loss ratios for large group plans dropped from 97.6% in 2018 to 87.6% in 2020. Data from the first three quarters of 2021 shows medical expenses increasing and HMO profits decreasing.
  • Enrollment in Colorado health plans increased by 10.5% in 2020 and continued to grow in 2021.

Enrollment in HMOs reached an all-time high of 1.761 million in 2020, with growth in individual and Medicaid plans.  Enrollment in Medicare Advantage plans has grown steadily, and the penetration rate is now 43.2% compared to 37.4% two years earlier. PacifiCare and Kaiser Permanente have the largest HMO plans, and UnitedHealthcare has the largest Medicare PPO plans.

            Excerpts from the report and information about ordering the report and data set can be found at www.AllanBaumgarten.com. For additional information, contact him at baumg010@umn.edu or 952/212-8589.

 

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September 12, 2019

 

Colorado hospital systems post record profits;

Health insurers are profitable again, add members

 

            (Denver) Net income for Denver-area hospitals in 2018 topped $2 billion for the first time. With the significant exception of the Kaiser Colorado HMO, health insurers were strongly profitable and increased their enrollment. Consolidation continues both for health systems and health insurers.

            These and other findings are reported in Allan Baumgarten’s Colorado Health Market Review 2019, released here today. This is the 20th edition of the report, first published in 1994. Baumgarten is a Minneapolis-based independent analyst and researcher on health finance in local markets, and he publishes reports analyzing trends and strategies for health insurers and hospital systems in Colorado and seven other states.

            The new Colorado report finds:

  • Denver-area hospitals reported record profits in 2018.

            Based on an analysis of data from their Medicare cost reports, 28 Denver-area hospitals reported combined pre-tax net income in 2018 of $2.104 billion, or 18.4% of total patient revenues of $11.424 billion. They had operating income of $959.7 million as well as other revenues, such as government grants, philanthropy and investments, of $1.048 billion. That is up from their 2017 net income of $1.728 billion, or 16.1% of revenues. They increased their net patient revenues by 9.2% in a year when patient care expenses grew by only 4.1%.

            The HealthONE-HCA hospitals reported pre-tax net income of $1.19 billion or 45.5% of revenues, and the Centura Health hospitals had net income in 2018 of $144.2 million. The University of Colorado Health system is now the largest in the state, and its flagship hospital in Aurora had net income of $436.1 million, or 23.1% of net patient revenues. The SCL Health hospitals in the region had margins of 10.3%.

  • Hospital systems outside the Denver were also strongly profitable.

In 2018, 28 hospitals posted combined net income of $822.8 million, including $520.4 million from operations and $248.8 million from other revenues. In 2017, these hospitals had combined net income of $686.9 million.  The University of Colorado hospitals, with locations including Colorado Springs and Fort Collins, had net income of $350.4 million , or 16.4% of revenues. The Centura hospitals had average margins of 9.0%, while the Banner Health hospitals had average margins of 11.6%.

  • Even with a strong economy, significant population growth and capital investments, inpatient hospital utilization has increased very slowly.

Colorado hospital systems have made significant capital investments in the past 15 years, including replacement hospitals, new mid-sized and “micro” hospitals, freestanding emergency rooms and clinics. Even as capacity has increased, inpatient utilization has increased by only about 1% a year. New hospitals and other facilities have gone up in the Denver and its suburbs and also in Fort Collins, Colorado Springs and Grand Junction. The University of Colorado Health system completed or acquired several new hospitals in the past three years on a path to establishing a regional health system that covers much of Colorado plus parts of Nebraska and Wyoming.

  • Large losses for Kaiser darkened an otherwise bright profit picture for health plans.

            Colorado HMOs reported net income of $120.2 million in 2018, or 1.3% of underwriting revenues, up $78.1 million in 2016. Much of that was from the Medicare Advantage plans of PacifiCare, a UnitedHealth Group company, in Colorado, Arizona and Nevada, and Anthem Blue Cross Blue Shield’s plans in Colorado and Nevada. However, Kaiser’s Colorado HMO, the largest health insurer in the state, lost $147.9 million in 2018 after losing $49.6 million in 2017. Kaiser’s results have improved: it reported unaudited net income of $138.9 million in the first six months of 2019.

  • Enrollment in HMOs has grown, as Colorado expanded Medicaid and more individuals are buying health insurance.

Enrollment in HMOs has surpassed its previous peak of 1.636 million set in 2000 and grew by 9% in 2018. About 40% are in individual and employer groups plans, while enrollment in Medicaid HMOs, though not full-risk arrangements, has grown sharply and is now 34.5% of the total. Enrollment in Medicare Advantage plans has grown steadily, and almost 40% of Medicare beneficiaries are in a health plan.

            Excerpts from the report can be viewed at http://www.AllanBaumgarten.com. Copies of Colorado Health Market Review 2019 can be ordered from Allan Baumgarten for $160.00. Orders can be placed at his website or by calling 952/212-8589 or sending E-mail to: Baumg010@umn.edu

 

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HMOs at a Glance
Report Contents

Introduction. . . . . . . . .  . . . . . . . . . . . . . . . . . . . .. . . . . . 3

Market Structure . . . . . . . . . . . . ... . . . . . . . . . . . . . . . . . 4

Health Plan Companies. . . . . . . . . . . . . . . . . . . . . . . . . . 4

Colorado Provider Systems. .  . . . . . . . . . . . . . . . . . . . . 6

Trend Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Health Plan Enrollment. . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Medicare and Medicaid Plans . . . . . . . . . . . . . . . . . . . . . .12

Revenues and Net Income. . . . . . . . . . . . . . . . . . . . . . . . . 15

Finances by Lines of Business . . . . . . . . . . . . . . . . . . . . . .16

Payments and Administrative Expesnes . . . . . . . . . . . . . . .16

Health Plan Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18

Hospitals and Hospital Systems . . . . . . . . . . . . . . . .  . . . . . . 21

Denver Area Hospitals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Revenues and Net Income. . . . . . . . . . . . . . . . . .  . . . . . . . . . . 23

Occupancy and Payer Mix. . . . . . . . . . . . . . . . . . . . . . . . . . .  . .25

Medicare Bonuses and Penalty Programs . . . . . . . . . . . . . . . . .26

Other Colorado Hospitals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Revenues and Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . .  . . .28

Occupancy and Payer Mix. . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . 29

Medicare Bonuses and Penalty Programs . . . . . . . . . . . . . . . . . . 31

A Look Ahead . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . .32

Media Coverage/Presentations

Colorado Health Market Review 2021:

John Ingold wrote in Colorado Sun, January 5, 2022:

"Thanks in part to federal relief funds, most Colorado hospitals were profitable in 2020"  Click here to read

Colorado Health Market Review 2019:

John Ingold wrote in Colorado Sun: "Denver-area hospitals made a record $2 billion in profits in 2018, according to a new report." Click here to read.

 

Colorado Health Market Review 2017 released November 16. "Colorado health system expand, are strongly profitable; Health insurers are profitable again, add members"

  • John Ingold wrote in the Denver Post: "Colorado health systems are strongly profitable; Health insurers are profitable again, add members"
  • Ed Sealover wrote in the Denver Business Journal: "Denver-area hospitals increase profits, with some reporting margins over 40%

Colorado Health Market Review 2015 released October 13. "Colorado hospitals consolidate and post strong profits; Health insurers add new members but profits fall"

  • David Olinger @dolingerdp wrote in the Denver Post: "Colorado hospitals make more money despite lower bed occupancy rates" 
  • Ed Sealover @esealoverdenverbiz wrote in the Denver Business Journal: "Denver-area hospitals earn record profit margins"