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Monday, December 17, 2018

Texas Health Market Review 2018 finds:

Insurance expansion gains erode and

Texas hospitals and health plans see declining profits in 2017

 

      Houston – Austin - Dallas/Fort Worth – With fewer insured patients, many Texas hospital systems saw their strong recent profits decline in 2017. And while HMO enrollment reached record highs in 2017, Texas HMOs lost money as a group, even on their usually profitable Medicaid plans.

      These and other findings are reported in Texas Health Market Review 2018, Allan Baumgarten’s 15th report analyzing insurers and hospital systems in the Texas health care market. He first published a Texas market analyzes in 1998. The report analyzes strategies and competition for health insurers and provider systems in Texas, examining the impact of the Affordable Care Act and other developments driving changes in the market. Based in Minnesota, Baumgarten is an independent analyst who currently publishes state health market reports in Texas and seven other states and conducts research for organizations such as the Robert Wood Johnson Foundation.

      The new report finds:

  • Profitability declined for many Texas hospital systems. In Houston, pre-tax net income for hospitals was $1.827 billion in 2017, or 8.4% of their net patient revenues. That was down 18.7% from net income of $2.246 billion in 2015, when they posted an average margin of 11.1%. Hospitals have benefited from a growth in insurance coverage in the state, seeing fewer uninsured patients, but the number of uninsured began to grow again in 2017. In the Dallas-Fort Worth area, average hospital margins dropped from 14.1% in 2015 to 12.7% in 2017, as combined net income decreased from $2.597 billion to $2.54 billion. Net income also decreased for Austin-area hospitals, with average margins declining from 16.5% in 2015 to 13% in 2017.
  • Hospital systems remained focused on growth, and are expanding through acquisitions, new construction, partnerships and adding new convenient care sites. The Baylor Scott & White system, already the second largest in the state, proposes to merge with the Memorial Hermann system in Houston, creating the state’s largest hospital system. Hospital systems continue to merge and expand, giving them significant power to demand higher payment rates from insurers. That merger may be the first of non-overlapping systems to get significant scrutiny from antitrust regulators.
  • HCA Healthcare, currently the largest system in the state, rebranded its north Texas hospitals with the name of its very profitable Medical City hospital. Some other systems are shrinking, including Tenet Health, which sold off its Houston and North Texas hospitals. Many systems have added new urgent care clinics and freestanding emergency rooms to expand their geographic reach.
  • Although the major systems continue to invest in new facilities, growth of inpatient utilization has slowed. Inpatient days provided by Houston hospitals have grown less than 1% in the past two years, while hospital days increased by less than 2% for Dallas-Fort Worth hospitals in two years.
  • As a group, Texas HMOs lost $18.2 million in 2017, compared to net income of $432.8 million in 2015. While Medicaid HMOs like Amerigroup and Superior HealthPlan posted strong profits, HMO Blue Texas (part of Blue Cross Blue Shield) lost $109.5 million and Texas Children’s Health Plan lost $40.6 million. The HMOs of UnitedHealthcare, now the largest insurer in the state, had combined net income of only $32.7 million, down from $161.3 million in 2015.
  • Growth of Medicare Advantage HMO plans slowed in 2017 but they remain their most profitable line of business. About 800,000 seniors were in Medicare plans in 2017, up from 765,000 in 2015, and UnitedHealthcare’s HMOs enroll more than a 40% of them. While they remain profitable, underwriting income for Medicare plans dropped from $413.7 million in 2015 to $259.6 million in 2017.
  • Medicaid HMOs lost $193 million in 2017. They reported operating income of $69.1 million in 2015, down from $131.9 million in 2013. Four Medicaid HMOs – Children’s Medical Center Health Plan (Dallas), UnitedHealthcare Community Plan, Texas Children’s Health Plan and HMO Blue Texas – posted large losses, though Amerigroup and Superior HealthPlan maintained their profits.
  • Enrollment in Texas HMOs grew by 3.3% in 2017, reaching 5.5 million, a record high for the state. About 3.1 million Medicaid recipients are now enrolled in HMOs, up from 2.9 million in 2015. Enrollment in HMO individual plans grew from 415,000 after the first open enrollment in 2014 to 883,000 in 2016 but has since dropped to 822,000 in March 2018.
  • While individual enrollment has increased sharply with implementation of the Affordable Care Act, several insurers have dropped out of that market segment. After showing early promise for new competition and low premium increases, only three or four insurers are selling individual plans on the Healthcare.gov exchange in the largest metropolitan areas.

 

Texas Health Market Review 2016 finds: 
HMOs add 1 million Medicaid and individual members from 2013 to 2015
Hospitals are strongly profitable, although inpatient use grows slowly;
Hospitals pursue strategies of expansion and partnership
 
      Houston – Dallas/Fort Worth – Austin.  Bolstered by strong profitability, Texas hospital systems are pursuing a variety of strategies to gain market share, including acquisitions, partnerships and new facilities. However, inpatient utilization is flat or increasing slowly in much of the state. Texas health insurers have added a million Medicaid and individual members in the past two years, but large losses by a few insurers broke a streak of strongly profitable years.
      These and other findings are reported in Texas Health Market Review 2016, Allan Baumgarten’s 14th report analyzing insurers and hospital systems in the Texas health care market. He first published a Texas market study in 1998. The report analyzes strategies and competition for health insurers and provider systems in the state, examining the impact of the Affordable Care Act and other developments driving changes in the market. Based in Minnesota, he is an independent analyst who currently publishes state health market reports in Texas and seven other states, Colorado, Florida, Illinois, Michigan, Minnesota, Ohio and Wisconsin, and contributes the data analysis to a study of New York health insurance markets published by the United Hospital Fund.
      The new report finds:
•     Texas hospitals continue to enjoy strong profitability. As hospitals form larger systems and expand their geographic reach, they have reported strong and, in some cases, growing profits. For example, hospitals in the Dallas-Fort Worth area had net income of $2.597 billion in 2015, or 14.1% of net patient revenues. That compares to net income of $1.998 billion in 2013, which was 12.1% of net patient revenues. They have had average margins above 12% for five of the last six years. Two hospital systems – HCA and BaylorScott&White -- had margins above 18% in 2015. Houston-area hospitals reported average margins of 11.1% of net patient revenues in 2015, down from average margins of 12.5% in 2014. The HCA hospitals in the area reported an average margin of 22.7% pre-tax, and the Memorial Hermann hospitals had a margin of 10.5%.
•     Hospitals are expanding through acquisitions, partnerships and adding new convenient care sites. HCA has hospitals in all four major metropolitan areas and in other parts of the state, and is rebranding its north Texas hospitals. The new BaylorScott&White Health system has significant market power in the Interstate 35 corridor from Dallas-Fort Worth to Austin. Tenet Health acquired Baptist Health in San Antonio, giving it a strong presence there and in other regions, including El Paso. Christus Health has acquired hospitals in east Texas, and the University of Texas is adding new hospitals and medical schools in Austin and the Rio Grande Valley. Many systems have added new urgent care clinics and freestanding emergency rooms to expand their geographic reach. Texas hospitals partnered with nationally known providers like the Cleveland Clinic and the Mayo Clinic and market the ease of getting high quality care close to home. In Dallas, Methodist Health joined the Mayo Clinic Care Network, and Baylor Health is now part of the Cleveland Clinic’s national cardio-vascular care network. University of Texas MD Anderson Cancer Center has expanded by establishing satellite centers in Florida, New Jersey and Arizona.
•     Although the major systems are making large investment in new facilities, growth of inpatient utilization has slowed. For example, Houston area hospitals have expanded and provided 300,000 more inpatient days in 2015 compared to 2013. On an average day in 2015, 70.3% of inpatient hospital beds in Houston were full compared to 67.4% in 2013.
•     Health plans like UnitedHealthcare, CIGNA HealthSpring and Amerigroup continued their strong profits, but HMO Blue Texas and Humana reported large losses.
•     Medicare Advantage HMO plans continue to grow and have been the most profitable line of business for HMOs. At the end of 2015, about 765,000 seniors were in Medicare plans, with more than a third of them in UnitedHealthcare’s very profitable senior plans. They had operating income of $413.7 million in 2015. 
•     Medicaid HMOs were less profitable in 2015 compared to 2013. They reported operating income of $69.1 million in 2015, down from $131.9 million in 2013.
•     Enrollment in Texas HMOs increased by 1 million lives from 2013 to 2015, due to growth in Medicaid and individual plans. About 2.9 million Medicaid recipients are now enrolled in HMOs, up from 2.4 million in 2013. Enrollment in HMO individual plans grew from 415,000 after the first open enrollment in 2014 to 883,000 in 2016. 
 •    While individual enrollment has increased sharply with implementation of the Affordable Care Act, several insurers have dropped out of that market segment. After showing early promise for new competition and low premium increases, only three or four insurers are selling individual plans on the Healthcare.gov exchange in the largest metropolitan areas. 
      Excerpts from the report, including the “Texas HMOs at a Glance” exhibit can be viewed in the State Reports section of http://www.allanbaumgarten.com. Copies of Texas Health Market Review 2016 in PDF format can be ordered for $160.00 at the web site or by calling Baumgarten at 952-925-9121. Fax: 952-925-9341, E-mail: Baumg010@tc.umn.edu
HMOs at a Glance
Data Set Summary
Report Contents

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

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

Health Plans ......................................................................................................................... 4

Hospital Systems    ................................................................................................................ 7

Trend Review................................................................................................. 14

Health Plan Enrollment ......................................................................................................... 14

Individual PLans and HealthcareGov .................................................................................... 17

Medicaid Managed Care and CHIP......................................................................................... 17

Medicare Plans  ........................................................................................................................ 18

Enrollment and Market Share by Region................................................................................. 21

Health Plan Net Income........................................................................................................... 23

Financial Results by Line of Business...................................................................................... 24

Administrative Expenses and Provider Payments.................................................................. 30

HMO Capital ............................................................................................................................ 32

Regional Markets and Hospital Systems....................................................................... 34

Dallas-Fort Worth ..................................................................................................................... 34

Houston...................................................................................................................................... 44

Austin.......................................................................................................................................... 52

San Antonio................................................................................................................................. 56

Other Major Hospitals................................................................................................................ 59

A Look Ahead .......................................................................................................................... 63

Media Coverage/Presentations

Texas Health Market Review 2018 released December 17: "Gains from insurance expansion erode and Texas hospitals and health plans see declining profits in 2017"

  • Mitchell Schnurman reported in the Dallas Morning News: "Profits R Us: Dallas-Fort Worth hospitals keep racking up the big bucks"
  • Will Maddox wrote in D Healthcare Daily: "Report: Texas Hospitals are Becoming Less Profitable"​
  • Data from the report on hospitals and health plans appears in the weekly Economic Snapshot, "Obamacare's Impacts," in the Dallas Morning News

Texas Health Market Review 2016 released December 8: "Texas HMOs add 1 million Medicaid and individual members from 2013 to 2015; Hospitals are strongly profitable but inpatient use is flat; Hospitals pursue strategies of expansion and partnership."

  • Sabiya Rice reported in the Dallas Morning News: "North Texas hospitals earned $15.2 billion in patient revenue in 2014"
  • Matt Goodman wrote in D Healthcare Daily: "DFW Hospitals Continue to Ride High Margins But Will Their Strategies Pay Off?"


Texas Health Market Review 2014 released January 9: "Texas hospital form statewide systems, strategic affiliations; hospital profitability remains very strong, but inpatient use is flat; HMOs gained nearly half a million individual members in 2014."
 

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  • Mary Ann Moser @maroser wrote in the Austin American-Statesman: "HUD gets $50 million for $164 million Lakeway hospital loan; new report shows that Austin-area hospital were slightly more profitable in 2013 than other Texas hospitals"
​2013 Report