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Instability Disrupts Seattle Health Care Market

Media Advisories
February 2001

Alwyn Cassil: 202/264-3484 or
Richard Sorian: 202/484-3475

ospital and physician contract disputes with health plans have disrupted the Seattle health care market, causing instability in provider networks, according to a new Community Report from the Center for Studying Health System Change (HSC). Coupled with the managed care backlash, the contract disputes also have threatened the viability of traditional health maintenance organization (HMO) products in the Seattle market, with HMO penetration dropping from 29 percent in 1997 to 20 percent in 1999. Seattle is one of 12 communities across the country tracked intensively by HSC researchers through site visits and surveys.

As hospitals and physicians sever contracts with health plans, consumers face diminished access to their usual providers or higher out-of-pocket costs. In response, several large employers have included new requirements for network stability in their contracts with health plans. Other key findings of the report, Market Instability Puts Future of HMOs in Question, which is based on HSC's third visit to Seattle, include:

  • Seattle hospitals have gained considerable market leverage in relation to both physicians and health plans, and the merger of Providence Health System and Swedish Medical Center has fueled this trend.
  • Physician organizations have struggled financially with risk contracting and rising overhead costs, with several large physician organizations becoming insolvent. Both hospitals and physicians have shied away from risk contracting, stripping HMOs of their most effective way of constraining costs.
  • Health insurance options for the poor, the elderly and individuals without employer-sponsored coverage have dwindled as health plans exited unprofitable Medicaid, Medicare and individual insurance lines of business.
  • Despite state budget pressures, safety net providers have remained strong and worked aggressively to enroll uninsured patients in public programs.
  • All of these developments raise important questions about the future of Seattle's health care market. How will instability in health plans' provider networks affect consumers' costs and access to care? Will traditional HMOs remain viable in the Seattle market? How will diminishing health plan participation in Medicare and Medicaid affect access to health care for seniors and low-income people?

    HSC researchers are available to discuss the findings and put them into a national context. To arrange interviews, please contact HSC Public Affairs. The new report is based on a September 2000 site visit and interviews with more than 85 Seattle health care leaders, representing providers, plans, employers and consumers.

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The Center for Studying Health System Change Ceased operation on Dec. 31, 2013.