Health Care Markets Weather Economic Downturn, Brace for Health Reform

Hospital Geographic Expansion Race for Well-Insured Patients Pushes Competition Beyond Traditional Market Boundaries in Many Communities

News Release
May 26, 2011

Alwyn Cassil (202) 264-3484 or

WASHINGTON , DC—Lingering fallout—loss of jobs and employer coverage—from the great recession slowed demand for health care services but did little to slow aggressive competition by dominant hospital systems for well-insured patients,according to key findings from the Center for Studying Health System Change’s (HSC) 2010 site visits to 12 nationally representative metropolitan communities.

Despite the weak economy, hospitals with significant market clout continued to command high payment rate increases from private insurers, and tighter hospital-physician alignment, particularly growing hospital employment of physicians, heightened concerns about growing provider market power, the study found.

“Despite the sluggish economy, dominant hospitals and systems generally maintained strong bottom lines, and many expanded beyond traditional geographic boundaries in their quest for well-insured patients,” said HSC President Paul B. Ginsburg, Ph.D.

High and rising premiums led to increasing employer adoption of consumer-driven health plans and continued increases in patient cost sharing, but the broader movement to educate and engage consumers in care decisions lagged. State and local budget deficits led to some funding cuts for safety net providers, but an influx of federal stimulus funds increased support to community health centers and shored up Medicaid programs, allowing many people who lost private insurance because of job losses to remain covered.

Hospitals, physicians and insurers generally viewed health reform coverage expansions favorably, but all worried about protecting revenues as reform requirements phase in.

The study’s findings are detailed in a new HSC Issue Brief—Key Findings from HSC’s 2010 Site Visits: Health Care Markets Weather Economic Downturn, Brace for Health Reformwritten by Laurie E. Felland, Ha T. Tu and Joy M. Grossman, all HSC senior researchers. The study is available online at The 2010 Community Tracking Study (CTS) site visits were jointly funded by the Robert Wood Johnson Foundation and the National Institute for Health Care Reform.

HSC researchers periodically visit 12 nationally representative metropolitan communities, interviewing representatives of providers, health plans, employers, policy makers and consumers. The 12 communities are Boston; Cleveland; Greenville, S.C.; Indianapolis; Lansing, Mich.; Little Rock, Ark.; Miami; northern New Jersey; Orange County, Calif.; Phoenix; Seattle; and Syracuse, N.Y. HSC has been tracking change in the CTS markets since 1996.

Other key findings from the 2010 HSC site visits include:

### ###

The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation’s 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.