Managed care, provider consolidation, and health care costs in the Twin Cities

Given their extensive experience with managed care, the Twin Cities of Minneapolis and St. Paul, Minnesota continue to be of interest to the health care community. This article provides a close look at the impact of managed care on provider consolidation and Integration (both hospitals and physician groups). The creation of integrated service networks (ISNs) is changing the way health care is being delivered in the Twin Cities. Health care costs in the form of premium increases have declined as health plans compete for market share. However, medical group practices have not implemented rigorous cost or quality control systems. The medical groups have shifted their physicians to salary payment, but this shift does not appear to be related to capitation payment and managed care. Hospital costs continue to escalate at double digit rates in spite of extensive consolidation of hospitals and a sharp reduction of bed capacity.