Hospitals Still Make Money; HMO Profits Dip

A look at Wisconsin’s health care market shows hospitals remain profitable even though fewer people are using their services. Meanwhile, HMOs in the state are not making as much as they used to.

Allan Baumgarten prepared the “Wisconsin Health Market Review.” That report says HMO growth in the state has mainly been due to large state contracts to provide BadgerCare. But the state’s largest HMO, UnitedHealthcare, has ended its contract for southeast Wisconsin. Baumgarten says Medicaid used to be quite profitable for HMOs. That’s changed as the state reduced what it pays for health services under the program, “The state has been pressing hard on the payment rates and has made specific reductions in payment rates in the last two years. I think the state maybe went a little too far in trying to save dollars in the Medicaid budget by reducing rates.”

Baumgarten’s market report predicts two significant health trends for 2013. The first will be more mergers of hospitals. The second trend will be continued capital investment by hospitals – even though the population isn’t growing and people are using the hospital less. “It’s a good question about how much capital investment continues to be needed. Obviously a good part of the new investment is in ambulatory centers in outpatient care but still, hospitals are still building in-patient beds at a time when the use of those beds has been declining.”