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The Community Snapshots Project
Capturing Health System Change
he Portland/Vancouver health care market is changing rapidly. Providers are consolidating, health plans are competing for market share, and the line between the functions of providers and insurers is blurring. By and large, providers and health plans have initiated these changes. Though rapid, they are not viewed as traumatic because the market, as one interviewee said, "had a head start [and is] built on a solid base." The history of managed care in this market is long, and the process of consolidation has been gradual. In the past few years, insurance premiums have flattened or, in some cases, declined, and hospital use rates have dropped despite the absence of organized or widespread employer pressures. Public policy initiatives have spurred much of the change by promoting competition among health plans and expanding the managed care market through Medicaid and other programs. Yet despite the turmoil, the outlook of the various "players" in the system is surprisingly positive.
The Portland/Vancouver market spreads over two states and comprises four counties with about 1.5 million people: Washington, Multnomah, and Clackamas counties in Oregon, and Clark (Vancouver) County in Washington State. This market is divided by the Columbia River, and the states have different regulatory and legislative approaches to health care. Despite this split, provider systems and employment markets in the area overlap. Vancouver and several outlying communities on the Portland side of the river are sub-markets in the metropolitan area.
Three major delivery systems, Providence Health System, Kaiser Permanente, and Legacy Health System, provide the vast majority of health care in the Portland area. Clark United Providers (CUP) in Vancouver is positioning itself to become a fourth major system in this market. Each Oregon-based system has a primary relationship with a health maintenance organization (HMO) through ownership or contract, but the contracts are not yet exclusive. A major change in the marketplace in the past two years has been the rapid development of provider alliances, as well as the horizontal and vertical integration of health systems.
Portland/Vancouver, like Oregon and Washington, generally, has a long history of managed care, dating back to the founding of the Kaiser Permanente Health Plan in 1947. Today, this area has one of the most extensive managed care markets in the country; its penetration rate is more than 50 percent. Four health plans dominate the market: Providences Good Health Plan, Kaiser, Blue Cross and Blue Shield of Oregon, and PacifiCare.
Although the Portland/Vancouver market does not have an active employer coalition or purchasing group, individual employers have taken advantage of stiff competition among health plans to reduce or stabilize rates and negotiate multi-year agreements. As insurers scramble to increase market share, their products are becoming more alike and include restricted-panel HMOs, preferred provider networks, point-of-service plans, and Medicaid and Medicare options. All use the same (or overlapping) networks. Health plans are increasingly seeking to differentiate themselves from one another.
Public policy has stimulated changes in Portland/Vancouver through both comprehensive health system reform and initiatives targeting low-income populations. Health system reforms based on managed competition and universal coverage based on an employer mandate have been legislated in both states. These laws accelerated the consolidation among health plans and providers in Portland and Vancouver, and despite the repeal of health reform legislation by the 1995 Washington State legislature, consolidation has continued. In the past few years, the Oregon Health Plan (OHP) and Washingtons Medicaid "Healthy Options" program and Basic Health Plan (a state-subsidized program for the working poor) have brought many new low-income individuals into managed care and have further stimulated competition and network development throughout the two states.
Changes in the health care market are having far-reaching effects on providers. The medical hierarchy has been rearranged, with primary care practitioners rising to the top as specialists, slip downward. In fact, primary care providers are in short supply in some parts of the market (e.g., Clark County), while there is a surplus of specialists. Solo and small-group practices are giving way to larger groups as physicians sell their practices or affiliate with provider networks. The mind-set of physicians has changed as their focus has shifted from affecting legislative initiatives to gaining market influence. In general, interviewees report that physicians are confused, frustrated, and less satisfied with their jobs. Hospitals no longer view themselves as independent inpatient facilities but as multi-loci service providers within regional or statewide networks.
Despite the rapid changes in the Portland/Vancouver area, nearly all interviewees believe that the health system has improved. Most believe that quality of care has improved and that the changes have brought more choice and better access for consumers, even for lower-income families. Competition is not seen as having yet led to cutthroat tactics or draconian measures. Interviewees identified only a few clouds in this picture: some perceive that consumers do not always understand their options well; some fear access and choice will be eroded as competition heats up; and some emphasize that health care for the uninsured remains a problem and that the changes have strained the network of safety net providers.