March 22, 2011
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Lansing’s hospital sector continues to be highly concentrated, with two major systems, Sparrow Health System and Ingham Regional Medical Center (IRMC). While Sparrow has always been the larger system, IRMC has successfully pursued profitable specialty-service lines. In recent years, however, IRMC has faced financial difficulties, sparking discontent among some physicians, nurses and patients.
Lansing’s health plan market is even more highly concentrated than the hospital sector, with Blue Cross Blue Shield of Michigan (BCBSM) increasing an already-commanding position in recent years. While that dominance has allowed BCBSM to keep provider payment rates relatively low, the plan has focused on, and largely succeeded in, keeping provider relationships—especially hospital contracting—non-adversarial.
“Given the high hospital and health plan concentration in Lansing, neither sector can really exert that much leverage over the other, establishing somewhat of a balance of power,” said HSC President Paul B. Ginsburg, Ph.D.
In August 2010, HSC researchers visited the Lansing metropolitan area—Clinton, Eaton and Ingham counties —to study how health care is organized, financed and delivered in the community. Researchers interviewed more than 40 Lansing health care leaders, including representatives of major hospital systems, physician groups, insurers, employers, benefits consultants, community health centers, state and local health agencies, and others.
Lansing is one of 12 communities across the country tracked intensively as part of the Community Tracking Study site visits, which are jointly funded by the Robert Wood Johnson Foundation and the National Institute for Health Care Reform. HSC has been tracking these communities since 1996. Key findings of the report, Lansing’s Dominant Hospital, Health Plan Strengthen Market Positions, available online at www.hschange.org/CONTENT/1194/ include:
Lansing’s position as the state capital has helped shield the community somewhat from the most severe effects of the 2007-09 recession. While Lansing’s economy was weakened, with unemployment increasing to levels slightly higher than the national average, respondents were quick to note that the community has fared significantly better than the rest of Michigan—a state extremely hard-hit by the recession.
The market has a handful of moderately large physician groups amid many smaller practices. In recent years, the larger practices have grown somewhat, mostly by acquiring previously independent small practices or recruiting individual physicians.
Sparrow, which was already expanding physician employment before passage of federal health reform, reportedly has stepped up employment in anticipation of the formation of accountable care organizations (ACOs). Competition between Sparrow and IRMC over physician practices is likely to heat up, as more physicians consider hospital employment.
Michigan’s Medicaid enrollment has grown substantially over the last few years as a result of the poor economy. In Lansing, enrollment increased to a total of 72,000 people in 2010—an increase of 23 percent since 2007.
In 2009, Michigan reduced Medicaid reimbursement rates to providers across the board. The state’s Medicaid rates, already below the national average a few years ago, likely rank even lower since the cuts.
Newly elected Gov. Rick Snyder’s proposed fiscal year 2012 budget would maintain Medicaid eligibility and optional benefits. The proposal also maintains Medicaid provider payment rates, but does recommend a reduction in state support for graduate medical education.
The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nations changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is affiliated with Mathematica Policy Research.