Should Hospitals Become Insurers?

In a recent blog post, Paul Levy, former CEO of Beth Israel Deaconess Medical Center in Boston, questions the logic behind hospitals and health systems entering the insurance business.

He cites a recent article in the Washington Post that discusses North Shore-Long Island Jewish Health System's plans to become an insurer; the report states that roughly 20 percent of healthcare networks have insurance products.

In some ways, becoming an insurer can appear advantageous for a hospital system. "If providers are going to find themselves with more at-risk contracts, why bother with an intermediary insurance company whose main goal in life is to extract a profit from the relationship between the provider and patients?" wrote Mr. Levy in his post.

However, Mr. Levy also points out several challenges with this strategy. He cites a blog post by Vince Kuraitis, JD, MBA, principal and founder of Better Health Technologies, that points out 6 key reasons hospitals should avoid getting into the insurance business.   Among them, Mr. Kuraitis argues taking on risk is not a core competency for providers. He also argues that health systems that aren't already taking on significant risk are too late to the game.

Mr. Levy also cites a separate article in the Washington Post on consolidation on healthcare; the article argues consolidation can, in some cases, lead to higher prices because of market dominance.

"I know of no industry in which unregulated market dominance has led to lower costs or greater customer choice. Monopolies, after all, behave like monopolies," wrote Mr. Levy. "Ah, but let's not worry. These organizations will be too big to fail."

More Articles Featuring Paul Levy:

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Paul Levy: End-of-life Conversations, as Seen By the Intensivist

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