| Managed Care On-Line News: Articles |
Chicago- Although HMO premiums in Illinois remain relatively expensive, competition in the market has driven down premium revenues and HMO profits. In addition, growth in Medicare HMO plans is likely to put pressure on Illinois hospitals and physicians to reduce surplus capacity and organize into more efficient provider systems.
These are among the findings of Illinois Managed Care Review, a new report on the Illinois health care market. The report, released today, combines detailed comparisons of HMOs and hospital systems in the state with an assessment of the impact of key market trends and issues.
The report was prepared by Allan Baumgarten, an independent health care finance and policy analyst. Baumgarten is also the author of annual reports analyzing managed care in Minnesota, Michigan, Ohio and Colorado. The new report benchmarks Illinois against those other markets on key measures of health plan and hospital performance. Support for the research was provided by Reden and Anders, actuaries and consultants, and the Integrated Healthcare Division of SmithKline Beecham.
Among the report’s findings:
On average, HMOs collected $127.61 per commercial member (not including Medicare or Medicaid enrollees) per month, down 4.3 percent from $133.33 in 1995. By comparison, Minnesota HMOs collected an average of $118.72 per member per month Combined with increased medical expenses, that hurt the average profitability of Illinois HMOs, which dropped to 1.1 percent in 1996. However, HMO margins improved to 2.1 percent in the first half of 1997, as premiums began to increase again.
Hospita1 profitability, on the other hand, is generally very strong.
For example, hospitals that are members of the Accord network posted average margins of 9.8 percent in 1996, while the Advocate hospitals had margins of 8.3 percent. Among the largest hospitals in other parts of the state, four had margins of more than nine percent. There is significant surplus hospital capacity throughout the state - on an average day, 40 percent of the inpatient beds in the Chicago area are empty. Yet, hospitals feel little pressure from HMOs or purchasers to reduce capacity. While several hospital systems have emerged in Chicago and other parts of the state, integration is still at a relatively early stage. In the Chicago area, nonaffiliated hospitals still control more than 45 percent of inpatient hospital market share.
However, hospitals will begin to feel financial pressure as HMO Medicare plans grow.
Enrollment in HMO Medicare plans passed 130,000 in December 1997, but that still is only eight percent of the seniors in Illinois. In markets such as Denver, 30-40 percent of seniors are now in HMO plans. As Medicare plans grow, inpatient hospital admissions and stays will decline, putting pressure on hospitals and physicians to rightsize their capacity and organize more efficiently. In addition. it will probably result in providers accepting additional risk through capitation arrangements.
Overall, enrollment in HMOs continued to increase in 1997, but at a slower rate than in 1996.
Enrollment in HMOs grew to 2.2 million or 18.8 percent of the state’s population in June 1997. Enrollment growth slowed in the first half of 1997 to 2.7 percent. By comparison, HMO enrollment increased by 13.6 percent in 1996. While commercial HMO enrollment has grown, many large and mid-sized employers are content to stay with their indemnity and preferred provider plans. They have not turned to HMOs, nor have they taken part in purchasing initiatives.
Copies of the report are available to the public for $75.00 by calling Baumgarten at 612-925-9121. Fax: 612-925-9341, E-mail: Baumg010@gold.tc.umn.edu
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