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EMBARGOED FOR RELEASE on Thursday, June 7, 2018                                  
Contact:      Allan Baumgarten, 952/925-9121
Cellular 952/212-8589
 
Minnesota Health Market Review 2018 finds:
Minnesota Health Plans Regain Profitability, Add Enrollees
New Competition Stirs for Medicare Health Plans
 
 
            (Minneapolis-St. Paul) Minnesota HMOs and health insurers returned to strong profitability in 2017, recovering from a year of large losses in 2016. Minnesota seniors are being offered a variety of new Medicare plans from old and new competitors.
            These findings are reported in Part One of Minnesota Health Market Review 2018, released this week by Allan Baumgarten. This is the 29th edition of the report, in which Baumgarten analyzes key trends and competitive strategies for organizations in Minnesota’s health care markets. Later this year, Part Two of the Minnesota report will analyze the state’s provider systems and their strategies, financial performance and inpatient utilization.
            The new report finds that:
•           Minnesota health plans, including HMOs, other insurers like Blue Cross Blue Shield, and County-Based Purchasing plans, posted profits of $296.1 million in 2017, or 1.7% of underwriting revenue. Large losses by two HMOs and Blue Cross Blue Shield in 2016 gave the industry overall losses of $523.2 million. In other words, health plans had a swing of $819.3 million to the good. To put their losses behind them, Blue Cross Blue Shield shed its money-losing individual plans, while Medica Health Plans terminated its major Medicaid contract.
•           Health plan enrollment grew in 2017, but not in all lines of business. Enrollment in Medicaid and other state programs grew by more than 54,000, or 6%, while enrollment in HMO commercial plans, individual and employer groups, grew by 61,000. However, many of the individual enrollees came to HMOs after Blue Cross Blue Shield ended its individual plans.
•           Enrollment in HMO and PPO individual plans dropped again in the first quarter of 2018. Individual enrollment peaked at about 311,000 at the beginning of 2015, but has dropped every year since, and dropped another 16.4% to 163,000 in the first quarter of 2018. Minnesota’s reinsurance program for individual plans enabled insurers to hold down or reduce premiums, but that program’s future funding is not assured.
•           Seniors have several new Medicare health plan options for 2018, and more are planned for 2019. Three of the largest Medicare plans in Minnesota – Blue Cross Blue Shield, Group Health and Medica – are Cost plans in which the health plan does not take risk for inpatient care. Those are going away, and those three companies introduced new full-risk Medicare Advantage plans for 2018. UCare already has a full-risk plan with 86,000 lives, and UnitedHealthcare is expected to market new senior plans here. About 60% of Medicare recipients here are in a health plan, among the highest rates in the country.
•           Another new Medicare plan is expected to be the new joint venture insurer, Allina-Aetna Health Insurance. The transition from Cost plans is creating opportunities for new entrants. The Allina-Aetna plan is a joint venture of the state’s largest hospital system and a national insurer. It is already marketing to employer groups and seeking approval to offer Medicare Advantage plans for 2019.
            Excerpts from the report, including the “Minnesota Health Plans at a Glance” page can be viewed at http://www.AllanBaumgarten.com. Subscriptions to Minnesota Health Market Review 2018 in interactive PDF format, including both Parts One and Two, can be ordered for $160.00 online at www.AllanBaumgarten.com. Phone: 952/925-9121. E-mail address: Baumg010@umn.edu
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For Release on Tuesday, March 27, 2018
 
Minnesota Health Market Review 2017, Part Two finds:
Net Income for Twin Cities Hospitals Drops by 19%;
Health Systems Continue Growth, Consolidation and Partnership Strategies;
Minnesota HMOs Regain Profits and Increase Enrollment by 8% in 2017
 
            Operating income for Twin Cities hospitals tumbled by $300 million in 2016, as their net income dropped for the second consecutive year. Inpatient days for those hospitals grew slightly for the second year in a row, as inpatient days covered by Medicaid increased again. Minnesota HMOs resumed their profitability and increased enrollment by 8.6% in the first nine months of 2017.
 

            These and other findings are in Part Two of Minnesota Managed Care Review 2017, published this week by Minneapolis-based analyst Allan Baumgarten. The report analyzes data from Medicare cost reports on financial performance and inpatient utilization for 31 Twin Cities area hospitals (including four in western Wisconsin) and 52 hospitals serving outstate Minnesota. The hospital analysis is organized around the region’s large integrated delivery systems, including Allina, Fairview and HealthPartners in the Twin Cities and Mayo, Essentia and Sanford Health in outstate Minnesota.
 
            Here are key findings from the new report:

  • Net income for Twin Cities hospitals dropped again in 2016. Twin Cities hospitals posted net income of $444 million (4.3% of net patient revenues) in 2016, down from $548.1 million in 2015 and $579.8 million in 2014. Though their net patient revenues grew by 5% in 2016, care delivery expenses grew by 8.2%. Margins for the Allina Health hospitals dropped from 8% to 3.0%, and net income for the Fairview Health hospitals fell from $164.7 million to $138.2 million. Net income was much improved at the HealthPartners hospitals, growing from $35.9 million to $102.1 million in 2016. Several systems have announced layoffs in the last year.
  • Inpatient hospital days increased for Twin Cities hospitals. They provided 1.46 million inpatient days, 36,000 more than in 2015. On average, 70.1% of beds were occupied in 2016, up from 69.2% in 2015. More than half of the additional days were covered by Medicaid, which now covers about 1 in 5 Minnesotans, and the rest by Medicare.
  • While some outstate systems improved their results, overall net income also declined for hospitals serving outstate Minnesota, from $1.244 billion in 2015 to $1.013 billion in 2016. Average margins decreased from 11.4% to 8.9%. Net income grew for the Mayo Clinic hospitals in the state, from $495.5 million in 2015 to $528.1 million. Margins for the Sanford Health hospitals grew from 12.4% in 2015 to 12.5%. However, two large systems, CentraCare and Essentia, had a sharp decline in their net income. Margins for the Essentia hospitals fell from 6.6% to 2.9%, while net income for CentraCare fell from $184.9 million to $14.2 million.
  • The merger of Fairview and HealthEast creates the largest system in the Twin Cities, with 29% of the market based on patient revenues. HealthPartners is absorbing Hutchinson Health, and the CentraCare system is combining with Affiliated Medical Center, a large group practice, and Rice Memorial Hospital. Health systems continue to grow through mergers, new construction of specialty centers and convenient care sites, starting insurance companies and strategic partnerships, with some systems covering large parts of the Upper Midwest.
  • Many Minnesota provider systems are participating in Accountable Care or shared savings arrangements with Medicare and Medicaid. Seven Minnesota provider systems operate Medicare Accountable Care Organizations, and 19 groups have similar contracts for Medicaid. In 2016, three Medicare ACOs earned shared saving, and six Medicaid IHPs did. Even so, the trend toward more-risk- or performance-based payment has been very slow for commercially insured groups in the state.
HMOs at a Glance
Data Set Summary
Report Contents

Part One
Introduction    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
 . .
 . . 3
Market Structure      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 

Health Plan Companies     .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . . . . . . . . .4
Network Arrangements and Provider Systems     .  .                                    .  .  .  .  .  .  . . . . . . 7
Trend Review       . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 
Health Plan Enrollment   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . .  . . . . . . . 8
Individual Markets and MNsure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
State Healthcare Programs .  .  .  .  .  .  .  ..  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .   .  . . . . . . . . . . 11
Medicare Health Plans  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .   .  .  ..  . 13
Health Plan Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . 14
Financial Results by Line of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Administrative Expenses  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .       21
Health Plan Capital. . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   23
A Look Ahead             . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25



Part Two
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 

Hospitals and Provider Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 

Twin Cities Area Hospitals and Systems............................................................9
Revenues and Net Income .  .  .  .  .  ..  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . . . 10
Occupancy and Payer Mix .  .  .  ..  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . . . .12
Performance Bonuses and Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Outstate Systems and Hospitals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  .  14
Revenues and Net Income  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Occupancy and Payer Mix .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . .    .  .  .  . . . . ..17
Performance Bonuses and Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Health Plan Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . 21
 Enrollment by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
Utilization and Effectiveness of Care and Enrollee Satisfaction .  .  .  .  .  .  .  .  . . . . . .23
A Look Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . .  . . 27

Media Coverage/Presentations
Minnesota Health Market Review 2018, Part One, released June 8: "Minnesota Health Plans Regain Profitability, Add Enrollees; New Competition Stirs for Medicare Health Plans"
  • Christopher Snowbeck wrote in the Minneapolis StarTribune: "Health Insurers Return to Profitability in Minnesota" Click here to view
  • Paul Demko wrote in Politico: "Massive financial improvement for Minnesota health plans last year." Click here to view.
  • Chistopher Snowbeck wrote in the Minneapolis StarTribune: "Health plans lost less on Medicaid last year." Click here to view
Minnesota Health Market Review 2017, Part Two, released March 27: "Net Income for Twin Cities Hospitals Drops by 19%; Health Systems Continue Growth, Consolidation and Partnership Strategies; Minnesota HMOs Regain Profits and Increase Enrollment by 8% in 2017"
  • Christopher Snowbeck wrote in the Minneapolis StarTribune: "Study: Big hospitals outside Twin Cities grow profits." 
  • David Montgomery wrote about the 2015 report in the St. Paul Pioneer Press: "Metro hospital profits fell in 2014, while outstate earnings rose"
  • Dan Diamond wrote about the 2015 report in Poiltico Pulse: "The Mayo Clinic had a nearly 18 percent profit margin"
Minnesota Health Market Review 2017, Part One, released June 9: "Minnesota Health Plans Go From Record Profits to Large Losses; Health Systems Push Ahead With Health Plan Strategies"
  • Christopher Snowbeck wrote in the Minneapolis StarTribune: "Operating Losses Swamp Investment Gains at Health Plans in Minnesota" Click here to view​​
Minnesota Health Market Review 2016, Part Two, released April 10: "Outstate Health Systems Increase Profits by 15%; Medicaid Covers More Hospital Days"
  • Christopher Snowbeck wrote in the Minneapolis StarTribune: "Study: Big hospitals outside Twin Cities grow profits." 
  • David Montgomery wrote about the 2015 report in the St. Paul Pioneer Press: "Metro hospital profits fell in 2014, while outstate earnings rose"
  • Dan Diamond wrote about the 2015 report in Poiltico Pulse: "The Mayo Clinic had a nearly 18 percent profit margin"

Minnesota Health Market Review 2016, Part One, released May 25: "HMO Profits for Public Programs Surpass $230 Million; Medicaid Enrollment Grows But Individual Market Remains Volatile; Hospitals Double Down on Health Plan Strategy"

  • Christopher Snowbeck wrote in the Minneapolis StarTribune: "Record HMO profits from state programs." Click here to view