Employers squeezed on health care

December 29, 2008
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Local employers are being squeezed by the bad economy, higher business taxes and ever-escalating health care premium costs, according to a report on the health care market in the Grand Rapids area.

The report, prepared by HealthLeaders-InterStudy, a Nashville, Tenn., health care market analysis firm, gave local employers a negative outlook for all pressures on their ability to provide health coverage to their workers.

"Employers here have also been slow to adopt wellness initiatives, citing cost concerns, and larger companies report seeing little return on investment from wellness initiatives," the report stated.

David Smith, president & CEO of The Employers' Association in Grand Rapids, said that in West Michigan, wellness programs are taking a back seat to survival.

"Companies are more worried about the short-term right now, how do we survive, not 10 years down the road," Smith said.

"Employers have done about as much redesign as they can in terms of high deductibles and reimbursements. Now they are stuck with, what do we do with providing insurance for employees in an economy that's questionable?"

The report, prepared in October, doesn't reflect the fall's financial meltdown nor the near-bankruptcy of Michigan automakers General Motors and Chrysler. One of 87 produced on health care markets around the country, according to Director of Market Overview Analysis Carolyn McMeekin, the report focuses on the health care market in Grand Rapids-Wyoming Metropolitan Statistical Area, which includes Barry, Ionia, Kent and Newaygo counties. The MSA's population is 776,742.

"Look for employers and employees to continue to absorb added expenses in the form of higher premiums and higher co-payments, with not much leeway in effecting any meaningful change in the costs of delivering healthcare services," the report warns.

Employers are struggling to keep businesses financially stable enough to avoid layoffs, and a recent Employers' Association survey on wage increases showed that the majority of its members are considering no increases for 2009 and holding the line on insurance costs, Smith said.

"Employers are trying to stay as much at status quo as possible," he said.

Lody Zwarensteyn, president of nonprofit health care planning agency Alliance for Health, said the manufacturing and health care industries are joined at the economic hip.

"They talk about how big health care is in terms of employment," he said. "They have to have the money to pay their employees, and they have to get it from the other sectors."

The reports also notes:

With Grand Rapids-Wyoming MSA enrollment of 185,954 in its Health Maintenance Organization, Priority Health has a 63 percent market share of the HMO market, with Blue Shield Blue Cross of Michigan second at 20 percent and Molina Health of Michigan, which serves Medicaid recipients, third at 9 percent.

Altogether, fully-insured Preferred Provider Organizations have a 20 percent market penetration. BCBSM has a resounding majority of the PPO business at an 87 percent market share, with 136,394 PPO enrollment in the MSA.

Based on inpatient discharges, Spectrum Health holds a market share of 60 percent, followed by Saint Mary's Health Care at 19 percent and Metro Health Hospital at 11 percent.

Two of the 10 hospitals in the MSA were noted for operating in the red: Gerber Memorial Hospital in Fremont and Ionia County General Hospital.

The report gives the pharmacy sector a neutral outlook for 2009, noting that the trend toward generics is offset by a population that is older, heavier and smokes more than most.

The report also gave a neutral 2009 outlook for physicians. Noting the size of Spectrum Health's market share and the lack of consolidation among physicians, the report suggests carefully watching as the formation of the Spectrum Health Medical Group unfolds amid concerns about lower reimbursements and decreased referrals for those outside the group. The area's physicians are less consolidated than in other parts of the country, Zwarensteyn added, but that trend is expected to pick up speed under financial pressures.

The report states that there is no physician shortage in the Grand Rapids-Wyoming MSA, with 2,621 doctors, 42 percent of them in primary care. The MSA has 337 per 100,000 residents compared to 276 per 100,000 nationally.

HOSPITAL MARKET SHARE

Health Systems/Hospitals
Spectrum Health
Saint Mary’s Health Care
Metro Health

      Market Share*
60%
19%
11%

*Based on inpatient discharges

Source: HealthLeaders-InterStudy, Grand Rapids Market Overview, October 2008.

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