Cost Challenges Ahead for Lansing Health Care Market

Media Advisories
March 2001

FURTHER INFORMATION, CONTACT:
Alwyn Cassil: 202/264-3484 or
Richard Sorian: 202/484-3475

he highly consolidated Lansing health care market - Blue Cross Blue Shield of Michigan has about 70 percent of the commercial insurance market, while Sparrow Health System controls more than 60 percent of the hospital market - portends rising costs for employers and consumers, according to a new Community Report from the Center for Studying Health System Change (HSC). Lansing is one of 12 communities across the country tracked intensively by HSC researchers through site visits and surveys.

Rising premiums, limited health plan competition and increased competition among hospitals and physicians for profitable specialty services all contribute to concerns that controlling costs will grow more difficult. Other key findings of the report, Highly Consolidated Market Poses Cost Control Challenges, which is based on HSC’s third visit to Lansing, include:

• Sparrow Health System and the other dominant hospital system, Ingham Regional Medical System, are expanding specialty clinical services in a competition to gain recognition as the highest-quality, "brand-name" hospital to build loyalty and profitability. Both systems have gained small payment increases from insurers after years of considerable discounts.
• Physicians are moving to increase clout with plans and hospitals. Some physicians, especially those in small single-specialty practices, are consolidating into larger groups, usually of about 10 physicians.
• Although 2000 premium increases ranged from about 10 percent to 25 percent, employers for the most part have absorbed the increases, with some adjusting pharmacy benefits and increasing employee cost sharing.
• While more people in Lansing have coverage than is true nationally, the Ingham County Health Department continues to lead efforts to further expand coverage and care for the low-income.

All of these developments raise important questions about the future of Lansing’s health care market. Can hospitals and physicians use their growing clout to gain higher payments? Will increased competition among hospitals and physicians for profitable specialty care lead to a medical arms race, too much capacity and higher costs? Can employers exert leverage with insurers and providers in a market with a heavily unionized workforce that expects wide provider choice and comprehensive coverage?

HSC researchers are available to discuss the findings and put them into a national context. To arrange interviews, please contact HSC Public Affairs. The new report is based on an October 2000 site visit and interviews with more than 85 Lansing health care leaders, representing providers, plans, employers, policy makers and consumers.