In the great national march toward integration, the Minneapolis-St. Paul market got off to an early start in the 1980s and '90s, which has led to a more concentrated market but one in which competitors can still come to the table to cooperate.
“I think there's always been this sense here in the Midwest; people don't live here for the weather,” says Lawrence Massa, president and CEO of the Minnesota Hospital Association. “We've always had to work together for our own survival, and I think that has carried over into how the healthcare providers work together.”
While the consolidation has been good for some, market trends have also conflicted with the political and market preferences of Minnesotans over the years.
Take the insurer market. The Twin Cities is home to one of the country's largest national insurers, UnitedHealthcare, yet the company effectively cannot operate in Minnesota because of a state law that prohibits for-profit HMOs from insuring people in the state.
“Even though UnitedHealthcare is based here, they don't sell a single health plan in the state of Minnesota because they are an investor-owned, for-profit business,” Massa says.
Still, healthcare market analyst Allan Baumgarten noted that UnitedHealthcare provides the administrative support for one of the market's three largest payers, Medica. The two other largest insurers in the state are Blue Cross and Blue Shield of Minnesota, and HealthPartners.
“There is a lot of activity going on here, and there is a lot of leadership in the purchaser community. I would say more than you see in most other markets,” Baumgarten says.
He noted that the Twin Cities tends to be a relatively expensive market, and there are some reasons to think that the heavily consolidated provider market has been using its leverage to shift Medicare losses onto the private payers.
The largest health system in the market is Allina Hospitals & Clinics, which took in 26% of the market revenue in 2009, followed by Fairview Health Services, which had 24%, Baumgarten says. A distant third was HealthEast, with 8.9% of the revenues. The remainder went mainly to smaller stand-alone hospitals that dot the market.
But in a sign of anti-consolidation pushback, former Attorney General Mike Hatch has taken on several of the providers and payers, most notably engineering the separation of Allina from Medica. Previously, the two had been one entity. Hatch also challenged Allina's physician-practice acquisition strategies and the charity-care practices and executive compensation of several not-for-profit provides in the Twin Cities.
Along with a small number of healthcare providers, Baumgarten noted that the market also has very little surplus hospital-bed capacity, which makes it difficult for payers to negotiate better rates. “If you have a health plan like Blue Cross, which has its own large market presence … given the level of concentration, it would be hard to really pull their enrollees out of one of the three systems because there's not enough excess capacity in the market to absorb all the patients that Blue Cross represents,” Baumgarten says.
Speaking of the power of cooperation, Twin Cities hospitals also tend to have higher-than-average levels of unionized employees, Baumgarten says.
The Minnesota Nurses Association has emerged as one of the more vocal such unions nationally, becoming one of the founding members of the aggressive National Nurses United in 2009.
Some 12,000 Minnesota hospital nurses waged highly visible and expensive contract negotiations in 2010, even declaring a one-day strike at all 14 Twin Cities hospitals and canceling a second, open-ended strike just before it was set to begin.
Rather than fracturing into individual battles, the hospitals banded together and formed a single front for public-relations purposes called Twin Cities Hospitals, which issued news releases in response to the nurses' claims of inadequate staffing and retirement plans.
The result? The nurses agreed to accept a contract and not walk out, deciding to press their demands for higher staffing ratios through pre-existing staffing committees at the various hospitals.