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Economic Downturn Strains Miami Health Care System

Hospitals Expand Geographic Competition in Search of Well-Insured Patients; Safety Net Mainstay Jackson Health Teeters Financially

News Release
Sept. 29, 2011

FURTHER INFORMATION, CONTACT:
Alwyn Cassil (202) 264-3484 or acassil@hschange.org

WASHINGTON , DC—Despite the economic downturn’s severe fallout on Miami’s tourism, real estate and construction sectors, some hospitals are expanding beyond their traditional geographic markets to compete for privately insured patients, according to a new Community Report released today by the Center for Studying Health System Change (HSC).

While hospital competition for well-insured patients is intensifying, county-owned Jackson Health System continues to struggle financially. Jackson is the major provider of inpatient care to Miami’s low-income residents and provides specialized services—including trauma care, burn care and organ transplants—to the entire community.

Miami hospitals suffered financially to varying degrees during the economic downturn. Hospitals with leverage to negotiate higher private insurer payment rates emerged with positive margins, although not without adopting cost-cutting measures. For example, the area’s dominant hospital system—Baptist Health South Florida—benefits from its location in the relatively affluent southern Miami-Dade region and remains financially strong, while largely inner-city Jackson struggles.

“Miami really is a tale of two cities with the mainstream hospitals expanding and competing to attract well-insured patients and the major safety net hospital on the brink financially,” said HSC President Paul B. Ginsburg, Ph.D.
     
In August 2010, HSC researchers visited the Miami metropolitan area—which parallels the borders of Miami-Dade County—to study how health care is organized, financed and delivered in the community. Researchers interviewed more than 45 Miami 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.

Miami 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, Economic Downturn Strains Miami Health Care System, available online at www.hschange.org/CONTENT/1244/, include:

  • Hospital systems are redefining their geographic service areas, and competition among hospital systems is increasing as they acquire or add facilities in areas beyond their traditional markets.
  • Health plans are developing lower-cost, limited-benefit products to serve the growing, price-sensitive individual insurance market and to forestall further decline of the small-group market.
  • Jackson Health System, the area’s largest safety net provider, is struggling financially, which, coupled with a lack of coordination among safety net providers, undermines the community’s ability to respond to the prolonged economic downturn.

Historically, Miami has been a geographically segmented hospital market, with systems facing little competition in their own neighborhoods. Baptist Health South Florida, a nonprofit system with five acute care hospitals, remains the market leader with approximately 20 percent of inpatient admissions. For-profit HCA and Tenet Healthcare Corp. dominate northern and western Miami-Dade. Mt. Sinai Medical Center, a nonprofit teaching hospital, is the largest stand-alone facility in the market with more than 700 beds and is the only hospital on Miami Beach. In 2007, the University of Miami Health System (UHealth) acquired Cedars Medical Center, a 560-bed community hospital—now University of Miami Hospital—across the street from Jackson Memorial Hospital.

The Kendall area is becoming a hotbed of competition between southern and northern Miami-Dade systems: Baptist’s new West Kendall Baptist Hospital, which opened in April 2011, is close to HCA’s Kendall Regional Medical Center.

Miami has a relatively large number of physicians per capita compared to other metropolitan areas and Miami physicians historically have preferred their independence over formally affiliating with other physicians and hospitals. Most primary care physicians in Miami continue to practice in small groups. In contrast, physicians in many specialties are consolidating into larger single-specialty group practices.  Many physicians still admit patients to multiple hospitals, and the actual employment of physicians by hospitals continues to grow more slowly in Miami than in many communities.

Miami’s largest commercial insurers include UnitedHealth Group, Blue Cross and Blue Shield of Florida, Aetna, CIGNA and AvMed, while Humana has a strong presence in the Medicare Advantage market. No plan holds a dominant market share, and the number of plans serving the commercial market has been relatively stable since 2005, following a series of health plan mergers and acquisitions earlier in the decade.

With the commercial health plan market relatively fragmented among a number of national and regional insurers, the leverage that any one plan has in provider negotiations is limited. In particular, Baptist Health is viewed by health plans as particularly effective at using its strong market position in southern Miami-Dade County to obtain favorable payment rates. While some specialty physicians have gained negotiating leverage by forming larger groups, health plans have more leverage over the primary care physicians in the market.

Because health plans have been unsuccessful in restraining provider payment rate increases or negotiating innovative payment arrangements, they instead have focused on developing and marketing products with higher deductibles, coinsurance and copayments to retain existing small-group business. Insurers also are beginning to market lower-cost products with more limited hospital networks. The plans hope these strategies will increase their ability to compete in the individual health insurance market in Miami, which is growing as small employers drop coverage.

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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.

 

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