Health System Change in Greenville, South Carolina

Round One Site Visit

Case Study
September 1997
Robert E. Mechanic, Christina A. Andrews, Janet M. Corrigan, Loel S. Solomon

he health care system that serves the growing community of Greenville, South Carolina, is described by some local respondents as a "last bastion of no change." A number of forces have acted to keep change at bay in the Greenville market. Large employers are relatively satisfied with the costs of health care benefits, and managed care plans have not gained substantial market share or influence. State and local health care policy makers have not implemented any aggressive health care purchasing strategies or major reforms. In addition, consolidation among the major hospital systems has also created a barrier to managed care. Nevertheless, important signs of change are emerging as the region’s economic growth begins to attract national and regional health care organizations, and local providers start positioning themselves in anticipation of increased managed care activity. Although these changes may appear small, they mirror trends observed in more active markets across the country.

The Greenville metropolitan statistical area (MSA) includes three communities: Greenville, Spartanburg and Anderson, which account for the bulk of the region’s population but represent distinct health care markets. The area’s population has grown steadily during the past decade, driven in part by new economic and industrial development in the Interstate 85 corridor between Greenville and Spartanburg. Nevertheless, the area’s per capita income and educational attainment levels remain well below the national average. These factors, combined with South Carolina’s stringent Medicaid eligibility requirements, reportedly have resulted in a large number of residents without adequate health insurance coverage. Greenville is a conservative community, and the concept of managed care conflicts with the high value many residents place on freedom of choice. The majority of the region’s managed care contracts are for PPO products. Greenville’s HMO penetration is low; several HMOs have made modest inroads but none is dominant.

The local health care system is dominated by several highly consolidated hospital systems. Competition between the two systems in Greenville County is acrimonious, while provider relationships in Spartanburg and Anderson have been much more collegial. In contrast to the consolidated market for hospital services, most community physicians practice independently and are not affiliated with a single hospital system. However, Greenville has one large multispecialty group practice that operates across the region and whose influence is growing. Organizational change in the provider market has been described as defensive -- "designed to keep outside health care organizations from entering the community."

Nevertheless, signs of organizational change have been escalating in response to local market competition and the perceived threat of competition from outside the community. For example:

• Hospital systems are moving to develop regional provider organizations. The most significant move was made by the three largest hospital systems in Greenville, Spartanburg and Anderson counties, which attempted to merge. However, the proposal was blocked in 1996 by a public referendum.

• Hospital systems are purchasing physician practices and investing in PHOs and other mechanisms to align hospital and physician services.

• Greenville’s only large multispecialty group practice is preparing to enter into capitated contracts.

• The region’s three largest hospital systems recently established a licensed HMO.

• National mergers in the insurance industry have shifted control of covered lives in Greenville to companies that are likely to be more aggressive in promoting managed care products.

It is unclear whether these developments signal an increase in the pace of health system change. Some respondents believe that unless health care costs increase significantly, other market conditions will act to preserve the status quo and keep outside managed care organizations from making major inroads.