Director’s Corner | February 2022
As Noble Prize-winning author and part-time marine biologist John Steinbeck wrote in a marvelous journal he kept as he and companion Ed Ricketts collected samples of marine life up and down the Gulf of California (aka the “Sea of Cortez), “It is advisable to look from the tide-pool to the stars to the tidepool again.”
Most of us, of course, spend most of our time bent over in the tidepool. That’s why the larger and over-arching environmental insights into specific healthcare markets across the US that Allan Baumgarten brings are so important. That’s why we’ve had Allan as a guest speaker in the past, why I hope to do so again in the future, and why I just ordered his “2021 Health Market Data Set” analyzing trends and strategies for health insurers and hospital systems (and purchasers) in Colorado.
Key among the findings that Allan reports was this: In the first year of the COVID-19 pandemic, Colorado health insurers increased their enrollment by 10% and posted record profits. Even though hospital systems in the state saw their profits decrease in 2019 and 2020, Denver-area hospitals still had average pre-tax profit margins above 10%.
For other key findings see below:
And, if you’ve not yet seen the report on how “Colorado Hospital Prices Continue to be Among Nation’s Highest,” click here.
PS. You may want to check out The Leapfrog Group’s new CAA Compliance Resource Center for all Leapfrog CAA tools, including registration for upcoming events, recordings, and tools from Sessions 1 & 2. Stay tuned for our next CAA Compliance Webinar on Pharmacy Mandates on March 1 from 12:00–1:00 pm ET.
Key findings of the 21st edition of Allan Baumgarten’s report on trends in Colorado include the following:
- After breaking records in 2018, Denver-area hospitals reported lower profits in 2019 and 2020. Based on financial data from Medicare cost reports, 28 Denver-area hospitals reported combined pre-tax net income in 2020 of $1.384 billion, or 11.4% of net patient revenues of $11.085 billion. That was down from net income of $2.104 billion in 2018 and $1.937 billion in 2019. In 2020, these hospitals had operating income of $246.2 million, a billion dollars less than in 2019. But they had other revenues of $1.084 billion, including several hundred million in COVID-19 Provider Relief Funds, as well as government grants, philanthropy and investment income.
- As in past years, the HealthONE-HCA hospitals were the most profitable, with average pre-tax margins of 24.4%, much less than 45.5% in 2018. The University of Colorado Health system is the largest in the state with net patient revenues from its hospitals of $4.348 billion. It had net income in 2020 of $629.7 million, or 14.5% of net patient revenues. About 62% of its net income was from its main hospital in Aurora, while its hospitals in Colorado Springs and Fort Collins accounted for most of the rest. Centura Health was the only large system that reported increasing its net income, from $258.8 million in 2018 to $359.6 million (11.5% of revenues) in 2020. The SCL Health hospitals reported net income of $112 million or 6.1%, down from 10.3% in 2018. SCL has announced plans to merge with Intermountain Healthcare, a large system based in Utah.
- Hospital systems in Colorado have made significant investments in hospitals, emergency rooms and other facilities, yet inpatent utilization has been flat in the past three years for Denver-area hospitals. Hospitals in the Denver Metro area provided 1.278 million days of inpatient care in 2020, about the same as in 2018. Hospitals in other parts of the state provided about 4% fewer inpatient days in 2020 compared to 2019, and their average occupancy rate dropped to about 57%. The University of Colorado health system has grown to seven hospitals outside the Denver area, after acquiring or building five hospitals in the past five years.
- Colorado HMOs increased their profits by 13% in 2020 to $662.3 million, more than in any previous year. Profits were especially strong for individual, large group and Medicare Advantage plans. Kaiser Permanente improved its net income from $245.2 million in 2019 to $378.4 million or 9.2% of revenues in 2020. PacifiCare, a UnitedHealth Group company, posted net income of $205.9 million for its Medicare Advantage plans in Colorado, Arizona and Nevada. Blue Cross Blue Shield’sPPO plans had net income of $225.5 million, or 12.3% of revenues.
- Additional claims for treating COVID-19 patients were more than offset by savings as hospitals suspended non-emergent surgeries and patients elected to defer care. Average medical loss ratios for large group plans dropped from 97.6% in 2018 to 87.6% in 2020. Data from the first three quarters of 2021 shows medical expenses increasing and HMO profits decreasing.
- Enrollment in Colorado health plans increased by 10.5% in 2020 and continued to grow in 2021. Enrollment in HMOs reached an all-time high of 1.761 million in 2020, with growth in individual and Medicaid plans. Enrollment in Medicare Advantage plans has grown steadily, and the penetration rate is now 43.2% compared to 37.4% two years earlier. PacifiCare and Kaiser Permanente have the largest HMO plans, and UnitedHealthcarehas the largest Medicare PPO plans.