Michael Dudley, former senior vice president of Norfolk, Va.-based Sentara Healthcare and CEO of its Optima Health plan, served as an executive with Sentara for 21 years. He previously spent 19 years at Kaiser Permanente, and across nearly four decades has "observed multiple cycles of providers rushing into the health plan business followed by the rapid exit of providers who fail in managing risk," he wrote in a blog post on Gist Healthcare.
Based on his experience, Mr. Dudley mapped out three "Be's," as he calls them, that every hospital thinking about launching a health plan should consider: "Be cautious, but not cowardly," "Be courageous, but not careless" and "Be cognizant, but not cocky."
Under the "Be cautious, but not cowardly," advice, Mr. Dudley explained how operating losses will begin to mount once the first member is enrolled in a new health plan.
"Yes, every startup health plan will experience losses for a period of time," he wrote. "Detailed preparation and thoughtful execution will not eliminate losses in the early years, but they will hasten the march to profitability."
Mr. Dudley also said while hospitals should be cognizant and learn from history — such as successful hospital-sponsored health plans like Kaiser Permanente — they shouldn't be "cocky."
"Don't think you can duplicate Kaiser," he wrote. There are lessons to be learned from successful and unsuccessful provider-sponsored health plans, he said.
"The tolerance and patience for early losses; the balance between integration and separation of the health plan and the providers; and the clarity of purpose and mission. Having a health plan to fill hospital beds is not a sustainable mission," Mr. Dudley said.
Access the full blog post on Gist Healthcare here.
Editor's note: This article was updated June 21 at 11:18 a.m. CT to reflect Mr. Dudley is the former senior vice president of Sentara Healthcare and CEO of Optima Health. He does not currently hold these roles. Becker's regrets this error.
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