After posting record profits in 2022, Minnesota HMOs are expected to report more moderate profits for 2023. While the Twin Cities hospital systems reported significant losses in 2022, the Mayo Clinic and Sanford Health hospitals continued their strong profitability. Further, the “Great Unwinding” resulted in a 5.2% drop in enrollment in Minnesota Medicaid HMOs in the 3d quarter of 2023.
Part Two of Minnesota Managed Care Review 2023, analyzes hospital system finances and inpatient utilization based on data from Medicare cost reports for 2022, and it updates health plan profitability data through the first three quarters of 2023. The analysis examines data for 32 hospitals in the Twin Cities area, including four in western Wisconsin that are part of Minnesota systems, and more than 50 hospitals serving communities in Greater Minnesota, including the Mayo and Gundersen hospitals in La Crosse, WI. The report organizes the financial and utilization data around the major health systems: Fairview, Allina and HealthPartners in the Twin Cities and Mayo Clinic, Essentia, CentraCare and Sanford Health serving communities in Greater Minnesota. Based on quarterly statements for the first nine months of 2023, the report shows reduced profitability for Minnesota HMOs, including Blue Plus, Medica and HealthPartners, and a loss for UCare.
Key Findings of This Report:
- In 2022, Twin Cities area hospitals posted combined losses of $425.5 million, or 3.4% of net patient revenues. They lost $1.263 billion on patient care operations but had other revenues from investments, philanthropy and government grants (including Provider Relief Funds) of $787 million. By comparison, they had a net income of $671.6 million in 2021, or 5.7% of revenues, and a net income of $308.8 million in 2020. This was the only time these hospitals had such losses in the past 20 years, decades in which hospital financial results have been strong. Since 2013, these hospitals had a combined net income of over $600 million four times and a net income above $500 million three other times.
- Even though they reported a combined loss of $11.2 million, the HealthPartners hospitals had the best results for the fourth year in 2022: In 2021, they had a net income of $221.3 million, or 10.8% of net patient revenues. Allina Health reported losses of $144.6 million, including $89.6 million at Abbott Northwestern, down from net income of $76.6 million in 2021. Fairview Health, including the University of Minnesota hospital, had losses of $123.2 million, compared to losses of $10.2 million in 2021. North Memorial saw its net income decrease from $118.6 million in 2021 to a loss of $33.3 million in 2022.
- Led by the Mayo Clinic hospitals, hospital systems in Greater Minnesota had strong net income in 2022. They had a combined net income of $$1.124 billion in 2022, down from $2.049 billion in 2021. The Mayo Clinic’s hospitals in Minnesota and La Crosse had a net income of $1.073 billion or 22% of net patient revenues. The Sanford Health hospitals in Minnesota, Sioux Falls, and Fargo had a net income of $416.4 million in 2021 but that dropped to $180.5 million in 2022.
- Inpatient hospital days at Twin Cities hospitals increased from 1.5 million in 2021 to 1.551 million in 2022, but that was still less than pre-COVID levels. The Fairview hospitals provided 24,000 more days of care and the HealthPartners hospitals added 9,000 inpatient days.
- As Minnesota and other states begin the “Great Unwinding” of re-verifying eligibility for Medicaid, Minnesota HMOs saw their Medicaid enrollment, a key source of revenues and profits, drop by 5.2%. According to KFF Health, Medicaid enrollment in Minnesota dropped by more than 211,000 between June 2023 and February 2024.
- After setting profitability records in 2022, mainly from their Medicaid plans, Minnesota HMOs saw their profitability drop by 53.8% in 2023, comparing the results for the first nine months of the year. Their net income dropped from $506.9 million to $234.3 million.
Table of Contents
Introduction
Companies Mentioned
- Abbott Northwestern
- Allina Health
- Blue Plus
- CentraCare
- Essentia
- Fairview Health
- Fargo
- HealthPartners
- Mayo Clinic
- Medica
- Sanford Health
- Sioux Falls
- UCare
- University of Minnesota Hospital
Methodology
The reports analyzing state health care markets are intended to be a resource to health care organizations facing a full range of challenges but also seeking to identify and benefit from opportunities that present themselves.
This report is presented in three main sections. The first part, Market Structure, describes the major health insurers and hospital systems in the state, showing recent entrants and the high-level of consolidation that has occurred in both the health plan and provider markets. Market Trends, the next section, presents our analysis of enrollment trends and financial results for the health insurers. The last section contains our analysis of financial and inpatient utilization data on the hospitals in the state.
The analysis of health plan companies is based on their annual and quarterly statements filed with the Department of Insurance, including forms prescribed by the National Association of Insurance Commissioners and supplemental reports required by the state. The publisher also uses Medicaid data from the Department of State Health Services and Medicare health plan and hospital data from the Centers for Medicare and Medicaid Services. The publisher has that data together with insights that they have gained in interviews with dozens of leaders in health care organizations in the state.
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