The Community Snapshots Project

Capturing Health System Change

Wilmington, Del.
1995

Overview

ecause the Wilmington, Delaware, health care market remained stable for many years, even small developments in the past two to three years represent accelerated change. The impetus for health system change came primarily from E. I. du Pont de Nemours & Company (DuPont), by far the largest and most influential employer in Wilmington. After offering a rich, fee-for-service health benefits package for decades, DuPont surprised the community by introducing and promoting managed care options for its employees. These options included point-of-service (POS) and closed-panel managed care plans, and the company offered incentives for employees to choose these options.1 Since DuPont’s pathbreaking actions, Wilmington’s health plans, providers, and other employers have scrambled to prepare themselves for the new health care market now taking shape. The state, in its role as a health care purchaser, is also entering the managed care market by placing most of its Medicaid enrollees in managed care plans under a Section 1115 waiver beginning January 1, 1996.

Despite these events, which are shaking up the major stakeholders in Wilmington’s health care market, managed care is only beginning to penetrate the market; there is little clinical integration or aggressive management of care by health maintenance organizations (HMOs). Estimates of managed care penetration vary from 15 to 40 percent, largely due to differences in the definition of managed care. According to our respondents, the term "managed care" may refer to insurance products with only some of the following features: financial incentives for patients to use network physicians; closed provider panels; primary care physician gatekeepers; utilization review and prior authorization requirements; and discounted fee-for-service or capitated payments to providers.

Wilmington providers have maintained a significant degree of control over their clinical practices and the type and level of reimbursement they receive from insurers. The hospital market is highly concentrated, with only two major systems, and hospitals are powerful market players. The dominant hospital system’s newest strategy is to bypass insurers; it has established a physician-hospital organization (PHO) that offers an insurance product. Although some primary care physicians in Wilmington are increasingly receptive to capitated reimbursement, specialists and hospitals remain opposed to it.

It is not yet clear who will be the ultimate winner in the struggle for power between providers and insurers. The outcome will depend, in part, on how fast and to what extent Wilmington’s local health care market expands to the urban areas outside Delaware’s borders. The Wilmington market’s boundaries are blurring, especially with regard to tertiary care, after many years as a self-contained health care community. The locally dominant hospital the Medical Center of Delaware now defines its market in regional terms to include affiliations with, and acquisition of, hospitals in Pennsylvania and Maryland. Conversely, neighboring Philadelphia’s hospitals and health systems are signing contracts with insurers that enable them to provide tertiary care to Delawareans. The transition from an insular, localized market to a competitive, regional one is the force behind managed care development and health system change in Wilmington.