Rapid Population Growth Attracts National Firms

Originally published as Community Report No. 4 by the Center for Studying Health System Change (HSC), Fall 2000. Authors: Debra A. Draper, Linda R. Brewster, Lawrence D. Brown, Carolyn A. Watts, Laurie E. Felland, Jon B. Christianson, Jeffrey Stoddard, Michael H. Park. HSC was a nonpartisan policy research organization funded principally by the Robert Wood Johnson Foundation.

Community Report: Phoenix, Arizona -- Health System Changes in the Third Round

In September 2000, HSC researchers visited Phoenix, Arizona, for the third round of the Community Tracking Study, interviewing health care market leaders about changes in the local health system and their effects on consumers. Phoenix was one of 12 communities tracked by HSC every two years. The first two visits in 1996 and 1998 established the baseline against which market changes were assessed. Phoenix's rapidly growing population and distinctive market characteristics made it a particularly dynamic community to study.

Rapid Growth Shapes Market Dynamics

Phoenix's explosive population growth was the defining feature of its health care market. The influx of new residents created strong demand for health services and attracted both providers and health plans seeking to establish themselves in a fast-growing market. Hospital systems were expanding capacity through new construction and acquisitions to keep pace with the growing population. Banner Health, the region's largest system, was particularly aggressive in expanding its network of hospitals and outpatient facilities. The growth also attracted national health plans looking to build market share, creating a more competitive insurance marketplace than many other HSC-tracked communities.

Insurance Market and Managed Care Dynamics

Phoenix had one of the highest managed care penetration rates in the country, with HMO enrollment well above national averages. Blue Cross Blue Shield of Arizona, United Healthcare, and CIGNA were among the major players, along with several regional plans. The market had experienced the same managed care backlash seen nationally, with plans loosening gatekeeping requirements and allowing more direct access to specialists. Medicare managed care enrollment was also significant in Phoenix, reflecting the large retirement-age population that had relocated to the area. Premium growth, while moderate by national standards, was beginning to accelerate as the underwriting cycle turned and provider consolidation increased hospitals' pricing leverage.

Access Challenges in a Growing Market

Despite the market's overall vibrancy, Phoenix faced significant access challenges. Arizona's uninsured rate was among the highest in the nation, reflecting the state's large low-income and immigrant populations and its historically limited Medicaid program. Safety-net providers, including the Maricopa Integrated Health System (the county's public health care provider), faced intense demand. Physician recruitment was an ongoing challenge, particularly for primary care doctors in underserved areas of the sprawling metropolitan region. The rapid population growth strained the existing provider infrastructure, and new facilities did not always locate in the areas of greatest need.

Sources and Further Reading

This Community Report was based on site visits to Phoenix conducted in September 2000 as part of HSC's Community Tracking Study. The research team included Debra A. Draper, Linda R. Brewster, Lawrence D. Brown, Carolyn A. Watts, Laurie E. Felland, Jon B. Christianson, Jeffrey Stoddard, and Michael H. Park. The Community Tracking Study was funded by the Robert Wood Johnson Foundation.