Healthcare Market Profile: Kansas City

The Kansas City-area hospital market is mostly a three-way tug of war with a state line thrown in to make things a little more interesting.

The prime hospital competitors are: HCA Midwest Health System, a 10-hospital regional system that is part of Nashville-based HCA; University of Kansas Hospital, Kansas City, Kan.; and St. Luke's Health System, based in Kansas City, Mo., which has eight hospitals out of its 11 in the Kansas City area. Smaller competitors are Sisters of Charity of Leavenworth (Kan.) Health System, with hospitals in Leavenworth and Kansas City, Kan.; and two-hospital Truman Medical Centers, Kansas City, Mo. For pediatric care, there is 263-bed Children's Mercy Hospitals and Clinics, Kansas City, Mo.

The competition between St. Luke's and KU Hospital is mostly on tertiary services, says Frank Brady , president of Brady & Associates, a healthcare consulting firm in Kansas City, Mo. “With respect to tertiary services, KU has a lot of clout,” Brady says. “St. Luke's does as well.” Brady adds: “I think probably the state line may make people on the Missouri side of the line think of St. Luke's before KU. People on the Kansas side of the line will think of both.”

HCA Midwest and St. Luke's compete on a broader array of services, with St. Luke's having the advantage for tertiary services, Brady says. Neonatal intensive care and cardiac surgery are two areas of intense competition between the two, he says.

Arif Ahmed , assistant professor of health administration at the University of Missouri-Kansas City's Bloch School of Business and Public Administration, says KU Hospital is growing into a more formidable competitor to St. Luke's on tertiary services. Both systems have cancer and heart centers that compete vigorously with each other, Ahmed says.

Children's has significant power in the market with its hospital and pediatric specialty physicians, he says.

HCA Midwest is taking a different tack relative to St. Luke's, Ahmed says. HCA entered the market in 2003 by purchasing the former tax-exempt Health Midwest system, and since then, it has consolidated services in downtown Kansas City, Mo., and in suburban areas, Ahmed says. The former Baptist Medical Center in Kansas City, Mo., now hosts rehabilitation and outpatient services, with its acute-care services shifted to the flagship hospital of the system, 325-bed Research Medical Center, he says. Now, HCA Midwest is making a big push into urgent care and outpatient centers, more so than St. Luke's, Ahmed says. HCA Midwest also has a significant marketing effort related to its emergency departments, advertising that its features shorter wait times, he adds.

Two health plans dominate the market, with Blue Cross and Blue Shield of Kansas City (Mo.) holding 40% to 45% of the market for private insurance and Coventry Health Care at 30% to 35%, according to Ahmed. Yet, the hospital systems, especially St. Luke's, retain a lot of power, too, he says. A few years ago, St. Luke's decided not to renew its contract with UnitedHealth Group, and Ahmed's employer dropped United and switched to Coventry, he says. “If you lose the St. Luke's account, you're looking at not having much buy-in from the employers in the market.”

The state line probably is a barrier to collaboration between, say, KU and St. Luke's on certain services, Ahmed says. The Mid-America Regional Council does have some healthcare initiatives, he says, including a program to build a true healthcare safety net in the region.

Two other entities are important players in the Kansas City, Mo.-area healthcare market, Ahmed says.

One is the Mid-America Coalition on Health Care , which started as an alliance of large employers and has now evolved into more than that, he says. The coalition can get the health plans and hospitals to the table to discuss quality reporting, he says. The coalition also has expanded the use of workplace clinics in the area.

The other is the headquarters of health IT provider Cerner Corp . in Kansas City, Mo., Ahmed says. This has led to greater adoption of health IT in the market relative to other hospital markets, and, moreover, Cerner's own benefit policies also have had an effect on the hospital market, Ahmed says. Cerner is a very large employer that has aggressively adopted high-deductible health plans and workplace clinics as means to control healthcare costs, he says.