(Denver) After reporting net income of more than $100 million in 2002, Colorado HMOs have already posted $93 million in profits in the first half of 2003. These profits were fueled by four straight years of double-digit premium increases. However, enrollment has dropped sharply for the third straight year. Hospital net income has increased and four new hospitals are opening in the next year.
These findings and others are contained in Colorado Managed Care Review 2003, the 10th edition of Allan Baumgarten's annual analysis of trends and issues in the Colorado market. The report was released here today. Baumgarten is an independent analyst and consultant on health policy and finance who first published a Colorado market study in 1994. In 2003, he is also publishing annual market reports in eight other states: California, Florida, Illinois, Michigan, Minnesota, Ohio, Texas and Wisconsin.
In his report, Baumgarten finds:
* Colorado HMOs had net income of $102.1 million in 2002, including $60 million in operating income. Their results for the first half of 2003 were even stronger.
Colorado HMOs lost $100 million from 1998 to 2000 and then made a small profit in 2001. However, results for 2002 and 2003 were much improved. Colorado HMOs had net income of $102.1 million in 2002, which was 2.8% of $3.6 billion of revenues. In the first half of 2003, HMOs reported net income of $93.4 million or 5.3% of revenues.
In 2002, the HMOs had net underwriting income of $22.7 million on their commercial (employer groups) business and $56.7 million on their Medicare plans. However, they lost $19 million on their Medicaid managed care contracts.
* For the fourth consecutive year, HMOs enjoyed double-digit premium revenue increases.
In 2002, HMOs collected an average of $189.55 in premium revenue per commercial member per month. That is an increase of 20.5% from $157.27 in 2001 and the fourth straight year of double digit increases.
Four years ago, the average amount collected was only $122.79. While these increases may be more moderate in 2003, there are still likely to be more than 10%. These sharp increases have caused employers to look for other health benefit options. Partly as a result,
* Enrollment in Colorado HMOs has dropped by about 350,000 lives in the last 18 months.
After peaking at 1.6 million enrollees in 2000, most HMOs have seen their enrollment decline sharply. As of June 2003, there were 1.2 million HMO members in the state. Enrollment has declined in all major lines of business, but especially for commercial plans.
In the past 18 months, enrollment in commercial HMOs went down by about 300,000 lives, from almost 1.2 million to 887,000. Health plans like Anthem Blue Cross Blue Shield and United HealthCare have been focusing on their other health plan arrangements, including PPOs. Only two HMOs continue to contract with the state for Medicaid enrollees.
* Use of capitation payments decreased again in 2002, from 22.4% of payments down to 18.2%.
Of the largest HMOs, PacifiCare is still the prime user of capitation arrangements, but it has seen a marked decrease, especially with hospital systems that no longer want to accept risk.
* Hospitals in the Denver area reported average net income of 13.6% before taxes.
Four new hospitals will be open in the Denver area in the next year or two. Based on Medicare cost reports for 2002, hospitals in the Denver metropolitan area had $469.8 million in net income before taxes, or 13.6% of net patient revenues.
Excerpts from the report, including the popular "Colorado HMOs at a Glance" page can be viewed at http://www.AllanBaumgarten.com. Copies of Colorado Managed Care Review 2003 can be ordered from Allan Baumgarten for $105.00. Orders can be placed at his website or by calling 952/925-9121, faxing 952/925-9341 or sending E-mail to: Baumg010@tc.umn.edu
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