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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 952/925-9121 or sending E-mail to: Baumg010@umn.edu

 

-End-

Colorado health systems expand, are strongly profitable
Health insurers are profitable again, add members


 
            (Denver) For the tenth straight year, Denver-area health systems posted higher pre-tax profits. Colorado health plans regained profitability and continued to add new members.
            These and other findings are reported in Colorado Health Market Review 2017, released here today. First published in 1994, this is the 19th annual edition of Allan Baumgarten’s analysis of trends, competition and strategies in Colorado’s health care payer and provider markets. Baumgarten, a Minneapolis-based independent analyst and researcher on health finance in local markets, publishes market reports in Colorado, Florida, Illinois, Michigan, Minnesota, New York (co-author), Ohio, Texas and Wisconsin.
            In the new Colorado analysis, Baumgarten finds:
•           Denver-area hospitals continue to enjoy strong profits, year after year.
            Based on an analysis of Medicare cost reports, Denver-area hospitals reported net income in 2016 of $1.324 billion, or 15.2% of net patient revenues. Three of the large systems – HCA/HealthOne, Centura and SCL Health – increased their profits compared to 2015. The HCA/HealthOne hospitals posted average pre-tax margins of 35.7%, while Centura hospitals had average margins of 6%m and the SCL Health hospitals had margins of 11.9%. The University of Colorado hospital, now the hub of the largest hospital system in the state, had net income of $221.5 million, less than in 2015, but still a margin of 15.2%. In 2016, Denver-area hospitals had operating income of $371.8 million, plus other revenues (mostly investments, philanthropy and government grants) of $970.2 million.
•           Hospitals in other parts of the states were also strongly profitable.
An analysis of 25 hospitals in other parts of the state showed an average margin of 8.5%, with hospitals like Banner McKee (Loveland), Centura St. Anthony Summit and UC Poudre Valley (Fort Collins) posting margins of 15% or more.
•           Inpatient occupancy in Denver hospitals fell from 69.2% in 2008 to 64.9% in 2016.
Denver-area systems have made significant capital investments, building five new hospitals in growing suburban areas and five large replacement hospitals. Even as capacity has increased, inpatient utilization has been largely flat. In the past two years, systems have made new investments in micro-hospitals and free-standing emergency departments in the Denver area, and constructed new or replacement hospitals in Colorado Springs, Fort Collins, Greeley and Grand Junction. The University of Colorado Health system has been especially active, completing or building five new hospitals since 2016, on a path to establishing a regional health system in Colorado and Wyoming.
•           Profitability for Colorado health plans recovered in 2016, after posting losses in 2015.
            Colorado HMOs reported net income of $78.1 million in 2016, or 1.1% of underwriting revenues. Most of that was from PacifiCare, a UnitedHealth Group company, which posted after-tax profits of $73.4 million on its Medicare Advantage plans in Colorado, Arizona and Nevada. Kaiser Permanente, the largest health insurer in the state, has only broken even or lost money in 2016 and 2015. Anthem Blue Cross Blue Shield and its HMO Colorado subsidiary had net income of $90 million in 2016, including operations in Nevada.
•           Insurance coverage has increased in the state, with many of the newly insured enrolling in HMOs.
In four years, the number of Colorado residents with health insurance increased by almost 675,000. Enrollment in HMOs grew by 8.2% in 2015 and 7.1% in 2016, and is now more than 1.5 million. Much of the growth has come from Medicaid plans, as Colorado was one of the first states to expand eligibility under the Affordable Care Act. Enrollment in individual plans continues to grow, as well, although that market segment is struggling with high premium increases and fewer competitors.
            Excerpts from the report can be viewed at http://www.AllanBaumgarten.com. Copies of Colorado Health Market Review 2017 can be ordered from Allan Baumgarten for $160.00. Orders can be placed at his website or by calling 952/925-9121, faxing 952/925-9341 or sending E-mail to: Baumg010@tc.umn.edu

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

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"