Plan profits plummet | Budget options include cuts of 15% | Legal victories support mergers

There has been a lot of talk about the disruption and costs of reform. For the most part, the data hasn’t been available. That’s starting to change as Q1 results from health plans hit. At the same time, state budgets are under stress with tremendous cuts (again) on the horizon.

We thought we had gotten through the worst after getting through the recession, but it may not be that simple. We’re watching the money in this edition of 5 Things.

1. Health plan underwriting take a huge hit in Q1

Washington Healthcare News pulled the Q1 financial performance of health plans in Washington State, and found Q1 was a particularly tough quarter.

Of the 14 licensed health carriers, only one saw improvement in their net underwriting position from Q1 2013 (Columbia United Providers). Regence, Premera and Molina took major underwriting hits year over year with losses at $52m, $43m and $40m for the quarter, respectively.

One bright spot: Group Health. While their net underwriting position from business activity eroded $4.5m, their Q1 net profit soared for other reasons to $95m (up $38m), or $91 per member per month.

2. Budgeting for the Exchange in 2015 a culture shift

Ron Sims, the incoming chair of the Exchange board, has seen tough budgets before. He’s seen good budgets before, too. But, he says, “I’ve never seen a budget process that just asks you to start volunteering what you want.”

With discussion of an Exchange budget of around $40m for 2015, it’s a significant change from the days of federal funds totaling over $200m. In 2013, the Exchange ran a budget of $83m. As one observer said, “I don’t care who you are. If you get your budget cut by more than half, that’s a fiscal and cultural challenge even when you theoretically understand you don’t need to do as much work as you were doing previously.”

3. Spokane funded by HRSA for new residency programs

The Spokane Teaching Health Center is a new consortium effort of WSU, Providence and the Empire Health Foundation, and was recently awarded a HRSA grant to expand medical education in the region. The new slots – up to 18 by year three – will focus on “inter-professional, team-based clinic opportunities” – taking a cross-disciplinary approach.

The initiative is a unique and collaborative effort in the state, which will likely include students from EWU, as well. As behavioral health integration efforts pick up steam, some of the best trained providers may be coming from programs like this.

4. Hospitals scoring some wins for affiliations in court

The controversial new Certificate of Need rules promulgated by DoH were overturned recently by a Thurston County Court. WSHA brought suit against the rules in Feb after a process which tried to place restrictions on hospitals’ ability to merge, affiliate or be acquired by other systems.

Also this week, a judge found that the UW-Valley affiliation was done properly. While that has been an agreement with some controversy, it might be finally put to rest. However, former Supreme Court Judge Phil Talmadge (who is a little busy these days) doesn’t sound like the fight is over: “The notion that you, as group – the elected, decision-making body of a government – can decide to relinquish your core government responsibilities to a nongovernmental board, to me, that’s a line you can’t cross over.”

5. 15% cuts itemized by agencies looking ahead to budget

Word has spread that state agencies have been asked to provide budget options to include cuts of up to 15%. With $1b shortfall from the McCleary decision likely to press budget writers (assuming the Supreme Court doesn’t find them in contempt and order the spending itself), and another anticipated shortfall of $1b to maintain existing levels of services, it’s probably smart to start asking for options early.

We’re also hearing that pink slips are already going out. Social media circles are reporting that DSHS is starting layoffs now rather than wait until next year.