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April 4, 2019

Michigan Health Market Review 2018, Part Two finds:

Michigan hospitals and health insurers report improved profits, driven by continued consolidation and coverage expansions of the Affordable Care Act

Hospitals across the state continue to enjoy growing profitability, benefiting from the increased number of persons gaining Medicaid and individual coverage. Yet, hospital systems are increasingly dependent on Medicare and Medicaid and especially vulnerable to proposed reductions in those programs. In the first nine months of 2018, Michigan health plans enjoyed improved profitability and growing enrollment.

            Part Two of Michigan Health Market Review 2018, released today, presents these findings and an examination of the competitive strategies of hospital systems in the state. Using 2017 data from Medicare cost reports and other sources, the report analyzes hospital finances and inpatient utilization for all general acute care hospitals in the Detroit area and 65 hospitals in other parts of the state. It also reports enrollment growth and profitability for Michigan health plans through September 2018. Here are the key findings in the new report:

  • Although their operating income decreased in 2017, Detroit area hospitals enjoyed a large increase in non-operating revenues and 3.7% higher net income. These hospitals, almost all of them organized into six large systems, had net income of $679.3 million in 2017, or 5.5% of net patient revenues of $12.462 billion. Their operating income decreased from $238.6 million in 2016 to $165.6 million, but they had $554 million in other revenues, including investments, philanthropy and government grants. This is the fourth straight year where these hospitals had combined profits or more than a half billion dollars. Two large systems reported major swings in net income. After three straight years of growing profitability, the Beaumont Health system, the largest in the region, saw its net income drop by 25%, from $360.5 million in 2016 to $271.8 million in 2017. The Ascension/St. John hospitals doubled their net income from $65.7 million in 2016 to $134.4 million in 2017.
  • Net income for hospitals in other parts of the state increased by about 35% in 2017, on top of an increase of 32.3% in 2016. Our analysis of data for 65 hospitals outside of the Detroit area showed that they had net income of $1.488 billion in 2017, or 8.6% of net patient revenues, up from $1.104 billion in 2016. While their operating losses grew sharply in 2017, their other revenues grew even faster. Three of the largest outstate systems had margins of 10% or more: McLaren Health Care (10.6%), Trinity Health (17.2%) and University of Michigan Health, including MetroHealth in Kent County and the five Mid-Michigan hospitals (10%).

    • inpatient hospital days increased slightly for Detroit area hospitals for 2017 but are still 10% less than at their peak in 2007. In 2007, Detroit-area hospitals provided 2.5 million days of inpatient care, but that number has declined almost every year since. The number of inpatient days covered by Medicaid has increased since 2014 when Michigan expanded Medicaid eligibility to more than 600,000 single adults without children. In 2017, Medicare and Medicaid paid for 79.1% of inpatient days in Detroit-area hospitals.
    • 21 Michigan provider organizations have contracted with Medicare Accountable Care Organization program, and 11 of them earned shared savings. In 2017, Michigan ACOs had a total of 511,000 enrolled beneficiaries and earned shared savings of $69.5 million.
    • Enrollment in HMOs increased slightly in the first three quarters of 2018. Michigan HMOs added 6,000 enrollees, and Blue Cross Blue Shield Mutual added 38,000 enrollees. Health plan profitability was much improved in 2018. HMOs had net income of $410 million in the first nine months of 2018 compared to $313 million in the same period a year earlier. Blue Cross Blue Shield improved its net income from $357.2 million in the first three quarters of 2017 to $648 million in 2018.

                Part One of Michigan Health Market Review 2019 will be released in June. The 2019 report will be the 23rd annual edition of our Michigan market analysis, which we first published in 1997.

    April 25, 2018
    Contact: Allan Baumgarten,
    Cell: 952/212-8589, Office: 952/925-9121
    Email: Baumg010@umn.edu Twitter: @AllanBaumgarten

     

    Release

    Michigan Health Market Review 2018 Finds:
    Led by Blue Cross Blue Shield Companies,
    Michigan Health Plans Report Record Profits and Higher Enrollment

    (Detroit/Ann Arbor/Lansing) Driven by very strong results for Blue Cross Blue Shield and its HMOs, Michigan health plans reported record high profits in 2017. These findings and others are reported in Part One of Allan Baumgarten’s Michigan Health Market Review 2018, released here today. This is the 22nd edition of the report examining Michigan’s health care payer and provider markets. Baumgarten, an independent analyst based in Minneapolis, also publishes market reports in seven other states. The Part Two report for Michigan, to be released later this year, will analyze the financial performance, inpatient utilization and competitive strategies of the state’s hospital systems

    Key findings in this new report:

    • Michigan HMOs recorded their highest profits in history: net income of $452.1 million in 2017, or 2.6% of underwriting revenues. That was 50% higher than their net income in 2016. The Blue Cross Blue Shield HMOs (Blue Care Network and Blue Cross Complete for Medicaid) had combined net income of $257.4 million, or 5.8% of underwriting revenues. Priority Health, which now covers the entire Lower Peninsula and is the second largest HMO, improved its net income to $91.5 million, or 2.6%.
    • Blue Cross Blue Shield Mutual of Michigan, which had lost $226 million in 2016, enjoyed a swing of nearly half a billion dollars, posting net income of $295.2 million. While it still lost money on its commercial plans, it was very profitable on its Medicare Advantage and Medicare Supplement plans.
    • Premiums grew faster than medical expenses for commercial plans (employer groups and individuals), and HMOs improved underwriting income on those plans from $12 million in 2016 to $203.2 million in 2017. Blue Care Network reported commercial plan profits of $155.9 million, up from $29.2 million in 2016.
    • Medicaid plans, now the largest line of business for Michigan HMOs, though still profitable, saw their underwriting income drop by 25% in 2017. Underwriting income for Medicaid HMOs fell from $298 million in 2015 to $165.4 million in 2016 and $122.5 million in 2017. Still Molina Healthcare posted a 3.8% margin on its Medicaid business, and Blue Cross Complete and McLaren Health had 2.8% margins on their Medicaid plans.
    • Enrollment growth for Michigan HMOs slowed in 2017. After increasing by 4.9% in 2016, enrollment in Michigan HMOs grew 1.4% in 2017, reaching 3.4 million. HMO Medicare plans added 36,000 new members, and 42.7% of Medicare enrollees are now in a Medicare Advantage plan. Medicaid plans added almost 23,000 lives, and Meridian Health, Molina Healthcare and UnitedHealthcare Community Plan are the three largest Medicaid plans.
    • After significant growth in 2014, 2015 and 2016, enrollment in individual plans here has begun to decline in 2017. Individual enrollment grew to 426,000 at the beginning of 2017, but declined during the year to 358,000, most of them in HMOs now. Blue Care Network, Blue Cross Blue Shield and Priority Health are now the largest individual plans here. Premium increases for individual plans for 2018 averaged 27.6%, much higher than in previous years. While some plans have exited that market, some others have expanded their service regions, including Meridian Health and McLaren Health.

    Excerpts from the report, including the useful "Michigan HMOs at a Glance" page can be viewed at www.AllanBaumgarten.com. A subscription to Michigan Health Market Review 2018, including both Parts One and Two, can be ordered online at http://store.allanbaumgarten.com/productlist.php?category=7 Or call 952/925-9121; E-mail address: Baumg010@umn.edu


    www.AllanBaumgarten.com

    4800 West 27th Street
    Minneapolis, MN 55416
    952/925-9121  Cell: 952/212-8589
    E-Mail: baumg010@umn.edu
    Twitter @AllanBaumgarten

HMOs at a Glance
Data Set Summary
Report Contents

Part One
INTRODUCTION         3
Market Structure      4
Health Plans 4
Provider Systems 8
Trend Review 9
Health Plan Enrollment 9
Medicaid Managed Care  12
Medicare Plans 13
Net Income  14
Financial Results by Line of Business 17
Provider Payments  21
Health Plan Capital22
A Look Ahead 23

Part Two

Introduction 3
Market Structure  4
Market Analysis 8

Detroit Area Hospitals  8
Revenues and Net Income  10
Inpatient Occupancy and Payer Mix 12
Performance Bonuses and Penalties 14
Other Major Hospitals 16
Revenues and Net Income  16
Inpatient Occupancy and Payer Mix 16
Performance Bonuses and Penalties . 21
Health Plan Trends 21
HMOs Hospital Admissions  23
Health Plan Enrollment and Net Income 24
Medicaid Enrollment by Region  25
Effectiveness and Utilization of Care  26
A Look Ahead 28

Media Coverage/Presentations

Michigan Health Market Review 2018Part One to be released April 25. Get pre-publication special pricing and read Jay Greene's pre-publication reporting: 

  • Jay Greene wrote in Crain's Detroit Business: "Health plan enrollment, profits hit record highs." Click here to view


Michigan Health Market Review 2017, Part Two,  released February 27, 2018: "Detroit hospitals increase operating income by more than $100 million; Michigan health systems continue growth, consolidation and partnership strategies; Increased HMO enrollment boosts 2017 profits"

  • Jay Greene wrote in Crain's Detroit Business: "Hospitals, health plans posted strong margins for 2016-17, but future could be rougher" Click here to view​​

Michigan Health Market Review 2017Part One released July 19: "Medicaid plans add members but profits drop sharply; HMOs and insurers post large losses on individual plans"

  • Jay Greene wrote: "Michigan health plan profits drop in 2016 by 8% but enrollment up 5%." Click here to view​

Michigan Health Market Review 2016, Part Two,  released May 8, 2017: "Medicaid expansion helps Michigan health systems to best net income; HMO enrollment grows in Medicaid, Individual and Medicare plans"

  • Karen Bouffard wrote in the Detroit News: "Beaumont, DMC posted strongest profits ever in 2015." Click here to view
  • Jay Greene wrote in Crain's Detroit Business: "Report: Michigan hospitals, health plans post slightly lower, but still strong, profit margins in 2015" Click here to view​​

Michigan Health Market Review 2016, Part One released July 27: "Medicaid Expansions Adds 183,000 HMO Members in 2015 and 2016, Increases HMO Profits

  • Jay Greene wrote in Crain's Detroit Business: "Michigan health insurers post near-record profits in 2015." Click here to view
  • Karen Bouffard wrote in the Detroit News: "Michigan Medicaid HMOs earn highest profits in decade." Click here to view​​
  • Mark Sanchez wrote in MiBiz: "In first full year of under state Medicaid expansion, HMO underwriting income spikes 83 percent." Click here to read
  • JC Reindl wrote in the Detroit Free Press: "Affordabe Care Act rates may jump 17.3% in Michigan." Click here to read
  • Sarah Hulett reported for Michigan Radio: "Insurers asking for average 17% rate increase for individual plans." Click here for her report

Michigan Health Market Review 2015, Part Two,  released March 7, 2016: "Consolidated Michigan hospitals report higher profits even as inpatient days are flat; Enrollment in health plan surges but profits drop"

  • Jay Greene wrote in Crain's Detroit Business: "Michigan hospitals post impressive profit margins" Click here to view


Michigan Health Market Review 2015, Part One,  released August 12: "HMO Enrollment Grows Sharply; Medicaid HMOs Add Members and Improve Profits."

  • Karen Bouffard wrote in the Detroit News: "Enrollment up in Michigan Medicaid HMOs, individual plans
  • Jay Greene wrote in Crain's Detroit Business: "Operating income of Michigan Medicaid HMOs rises 295% in 2014"