Minnesota health care industry weathers cuts and growth

  • Article by: GLENN HOWATT , Star Tribune
  • Updated: February 2, 1997 - 10:00 PM

The health care business, one of the state's largest industries, is booming by some measures.

Enrollments in Minnesota's four largest health plans never have been higher. Last year, Medica surpassed the symbolic 1 million enrollment mark and Blue Cross exceeded some of its membership growth goals.

Patients have been streaming into metro area hospitals and clinics. Outpatient admissions continued to be the growth market for hospitals, but even inpatient admissions were relatively strong in 1996.

In spite of these growth trends, however, many organizations laid off or reshuffled workers, trimmed overhead, closed facilities or retooled.

This contradictory combination of growth and downsizing can be partly explained by the peculiarities of health care economics, a world that is in flux.

"A lot of what is happening here is we are sorting out the question of control over important health care decisions and where the locus of that control ought to be," said David Strand, Medica's president.

Until the question of control is settled -- and some say it won't be without a public and political dialogue -- the decisions that affect care of patients will increasingly draw more attention than the issues of health care finance.

Health care is a system in transition. It has one foot planted in a traditional mission -- responding to sickness and injury -- and the other in a new role altogether, one that tries to accommodate an idealistic vision of promoting health and wellness for everyone.

What is unclear is whether the events of 1996 indicate that the system is moving forward, going backward, or is just plain stuck.

What is clear for health plans, hospitals and clinics, however, is that the pressure to keep costs down has never been more intense.

Employers -- who foot the bill for most health care costs -- want to keep cost increases to a minimum, and are more than willing to shop for new arrangements if costs get too high.

With Medicare and Medicaid both being candidates for legislative surgery, the health care community is preparing for the day that those government insurance programs affect reimbursement levels.

It is equally clear that the demand for health care services still will exist: children will run fevers, hearts will fail, and people will accidentally cut themselves while preparing supper.

The big questions are whether the cost pressures will affect the health system's ability to meet the demand for services, and whether 1996 is merely momentary re-adjustment -- or a harbinger of things to come for an industry that employs nearly one out of very 10 Minnesotans.

The new cost wars

The financial pressures in the system last month nearly broke the relationship between Blue Cross, the state's largest health insurer, and Allina, the state's largest hospital system.

The two were deadlocked over terms of the contract that determines what prices Blue Cross pays when its members use Allina's hospitals.

It was emblematic of what health care finance has become during the past 20 years. The insurer wanted lower prices. The hospital wanted enough revenue to cover patient costs and pay for some overhead.

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