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August 4, 2020                                                                                                    

Minnesota Health Market Review 2020 finds:

Medicaid health plans add 69,000 enrollees in 2020;

Profits for Minnesota health plans drop in 2019, but likely strong in 2020

            (Minneapolis-St. Paul) As tens of thousands of Minnesotans lost their employer-sponsored health insurance in 2020, Medicaid managed care plans added almost 70,000 new enrollees. Health plan profits dropped sharply in 2019, especially for Medicaid and individual plans, but are likely to rebound in 2020.

 

            These findings are reported in Part One of Minnesota Health Market Review 2020, released today by Allan Baumgarten. This is the 31st edition of the report, in which Baumgarten analyzes key trends and competitive strategies for organizations in Minnesota’s health care payer and provider markets. Part Two of the Minnesota report, to be released later this year, will present his analysis of the state’s provider systems and their strategies, financial performance and measures of inpatient utilization. The new report finds that:

 

  • Although enrollment in Medicaid health plans dropped by 3% in 2019, they added 69,000 new enrollees in the first half of 2020. As a result of the COVID-19 pandemic and the economic downturn, an estimated 56,000 adults in Minnesota lost their employer-sponsored coverage and are uninsured. About 150,000 others enrolled in Medicaid, including about 69,000 who have joined Medicaid HMO plans.

 

  • In 2019, enrollment in Minnesota HMOs grew by about 1% as Medicare plans added 48,000 new members but commercial and Medicaid plans lost members. Enrollment in HMOs grew to 1.366 million, with 67.3% of them in Medicaid and MinnesotaCare. Medica and UCare added the most new enrollees. Blue Cross Blue Shield lost almost 58,000 enrollees. Humana Insurance Company increased its Minnesota premiums by about $614 million to $1.084 billion, adding about 77,000 enrollees to its Medicare Advantage products.

 

  • After posting strong profits in 2017 and 2018, Minnesota HMOs reported losses of $70.2 million in 2019, or 0.7% of operating revenues. While Medica’s HMO had net income of $56.9 million, HealthPartners lost $86.1 million and UCare lost $31 million. HealthPartners did make money on its individual plans, benefitting from Minnesota’s reinsurance program. Net income for Blue Plus dropped from $141 million in 2018 to $7.1 million in 2019. Much of the was due to a drop in the profitability of its individual plans. Blue Plus lost $11.7 million on individual plans in 2019 after reporting underwriting income of $54.6 million in 2018.

 

  • Of the other insurance companies, Medica Insurance Company, which now sells individual plans in nine states, reported net income of $365.1 million in 2019. That is across all of its states, although Minnesota accounts for about 46% of its revenues. Its individual and group plans in Minnesota were very profitable, earning combined underwriting income of about $86 million. Blue Cross Blue Shield had losses of $77 million in 2019 and reported losses in three of the last four years. In its first full year, Allina Health Aetna Insurance lost $18.5 million, about half from its operations and half from amortizing an intangible asset, namely discounts on care provided by Allina hospitals and physicians. Allina-Aetna gained about 8,900 enrollees in 2019 and added about 4,000 Medicare Advantage members at the beginning of 2020.

 

  • Even though many health plans lost money in the first quarter of 2020, sometimes from investment losses, they should finish the year with good profits. Claims have been low so far, because non-emergency surgeries were suspended, and many families were reluctant to go to clinics for routine care or to hospitals for acute care.

 

            Excerpts from the report, including the “Minnesota Health Plans at a Glance” page can be viewed at AllanBaumgarten.com. Subscriptions to Minnesota Health Market Review 2020 in interactive PDF format, including both Parts One and Two, can be ordered and downloaded for $160.00 at www.AllanBaumgarten.com. Phone: 952/212-8589. E-mail address: Baumg010@umn.edu

 

Allan Baumgarten currently publishes reports analyzing health care payer and provider markets in Minnesota and five other states: Colorado, Florida, Michigan, Ohio and Texas. He conducts project research for a number of clients and has completed two studies of health plan and provider system strategies for the Robert Wood Johnson Foundation.

NEWS RELEASE For Release on Monday, April 20, 2020

Minnesota Health Market Review 2019, Part Two finds:
Led by Mayo Clinic, Outstate Hospitals Post Record Net Income in 2018; Metro and Outstate Hospitals Increase Inpatient Days for First Time in Recent Years

Hospital systems serving outstate Minnesota communities increased their inpatient days in 2018 and reported combined net income of $1.5 billion, their highest ever. Mayo Clinic’s Minnesota hospitals generated more than half of that amount, followed by Sanford Health and CentraCare.

These and other findings are reported in Part Two of Minnesota Managed Care Review 2019, released today by Allan Baumgarten, a Minneapolis-based analysis who first published his Minnesota market analysis in 1990. Analyzing data from Medicare cost reports and other sources, he compared financial performance and inpatient utilization for 31 Twin Cities area hospitals (including four in western Wisconsin that are part of Minnesota systems) and 51 hospitals serving communities in outstate Minnesota. This report focuses on the major integrated delivery systems in the region: Fairview, Allina and HealthPartners in the Twin Cities and Mayo, Essentia, CentraCare and Sanford Health in outstate Minnesota.

In the new report, Baumgarten found:

• Hospitals serving outstate Minnesota communities improved their net income from $1.406 billion in 2017 to $1.509 billion in 2018, and their average margins grew from 8.9%in 2016 to 11.9%. The Mayo Clinic hospitals in the state increased their net income from $671.8 million in 2017 to $848.6 million in 2018. The Mayo Rochester hospitals alone had net income of $822.6 million, or 31.8% of net patient revenues. The Sanford Health hospitals reported net income of $222 million, while CentraCare, now including Rice Memorial hospital, had net income of $206.8 million in 2018 or 18.1% of net patient revenues. The Essentia hospitals reported combined net income of $91.7 million, down from $131.5 million in 2017.

• Twin Cities area hospitals reduced their operating losses and posted net income of $523.5 million in 2018, or 4.7% of net patient revenues. That was down from net income of $620.3 million (5.9% of net patient revenues) in 2017 because their other revenues from investments, philanthropy and government grants dropped by about $170 million. Seven hospitals in the region reported margins above 10%. The Fairview Health system, including the four HealthEast hospitals, saw its net income decrease from $236.3 million to $206.4 million, while the Allina hospitals in the Twin Cities increased their net income from $204.2 million in 2017 to $220.8 million or 7.5% in 2018. The HealthPartners hospitals saw their income decrease from $129.5 million in 2017 to $76.5 million in 2018.

• Inpatient hospital days increased in 2018 for both Twin Cities and outstate hospitals, the first significant increase since 2007. Twin Cities hospitals provided 1.513 million inpatient days, about 55,000 more than in 2017, though still less than in 2008. On average, 71.6% of beds were occupied in 2018 at metro area hospitals. (The availability of hospital beds staffed and equipped to provided intensive care level services is an important issue during the COVID-19 pandemic.) Hospitals serving outstate communities provided about 36,000 more inpatient days in 2018. Minnesota hospitals are increasingly dependent on government payers. Medicare and Medicaid covered 68.9% of inpatient days for Twin Cities hospitals and 68.7% for outstate hospitals, which has been good for hospital revenues, but also makes the hospitals vulnerable to cuts in federal programs.

• Health systems continue to expand through acquisitions and new facilities but, before the COVID-19 pandemic began, some systems announced plans to close or downsize some facilities. Mayo Clinic is closing a hospital and clinic in Springfield, and Fairview proposed to close St. Joseph and reduce operations at Bethesda Rehabilitation, both in St. Paul. Two deals to merge large hospital systems in the region were called off in 2019: Gundersen and Marshfield Clinic in western Wisconsin cancelled their plans, as did UnityPoint Health and Sanford Health.

Minnesota HMOs were not strongly profitable in the first six months of 2019. Medica Insurance Company, which sells individual, group or Medicare plans in 10 states, had net income of $247.3 million during that period and a margin of 14.5%.

This is the 30th year that we have published Minnesota Health Market Review. Part One of the 2020 edition is scheduled for release in June. The Part One report will examine 2019 data on the enrollment trends and financial results of Minnesota health plans, including an extended analysis of trends in the individual market and the finances of Medicaid HMOs. Additional information can be found at www.AllanBaumgarten.com

 
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