12 questions to ask before launching a provider-sponsored health plan

Across 39 states, 107 health systems offer health plans in one or more markets. Here are a dozen questions to ponder if your health system is considering joining that group.

Provider-sponsored health plans require a range of capabilities and strategies to lessen the inherent tension between acting as a provider and a payer. The following questions — from a new report from McKinsey, "Provider-led health plans: The next frontier — or the 1990s all over again?" — can help guide conversations among senior leaders who are considering offering a health plan. 

Strategy  
1. Which consumer segments and which markets offer incremental value creation if we create an integrated delivery network?
2. What type of health plan will we offer? Plans can be completely closed, or partially or wholly open. Value creation differs depending on the plan type.
3. How can we best capture value from integration? Should we build or buy a health plan?
4. How do the benefits we can gain from offering a health plan compare with those we could obtain through a closer partnership with one or two local payers?
5. What risks are we most likely to face if we offer a health plan?

Structure
6. How will we manage value creation conflicts between the payer and provider business? Health systems must be able to manage internal incentives for both physicians and operating unit leaders.
7. How should we address channel conflicts between our health plan and third-party plans? Unless the health system obtains 100 percent of its patients through the health plan, problems might come up when it negotiates with third-party payers, especially those with significant market power.
8. What is the optimal way to organize the combined entity? Is it by geography, customer segment or something else?
9. Which part of the organization should own specific business processes? How will the health plan be governed and how will financial risk be allocated?

Operational, financial and regulatory readiness
10. What additional skills or capabilities do we need? What are the key areas we need to strengthen, such as member acquisition, regulatory and compliance, and utilization management? Many systems face a capability gap because of their lack of experience in managing care outside of hospital or clinical walls.
11. How do we manage the heightened balance sheet risk of a combined provider-payer entity?
12. How much capital will we need to not only build an infrastructure but also maintain the appropriate risk-based capital levels?

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