Some of the largest, most financially stable health systems in the country share a business line — operating a health plan — but it is far from an easy task.
Pittsburgh-based UPMC, Danville, Pa.-based Geisinger Health System, Salt Lake City-based Intermountain Healthcare, San Diego-based Sharp HealthCare and Scripps Health, along with many others, have their own health insurance arms. The risk-intensive environment isn't for every system, but as healthcare reform increasingly emphasizes population health management, the allure of becoming both payer and provider grows.
Frank Williams, CEO of Evolent Health in Arlington, Va., says this integrated approach is spurring hospitals to explore the option. "There's an opportunity to change from a 'come-into-the-hospital-or-doctor's-office' model to a much more coordinated proactive care management model," he says. "Shifting focus to preventive care can dramatically lower costs, but you can't do that if you don't change the way you're getting reimbursed."
However, systems that start health plans from scratch face several barriers to entry. First, the startup costs can be steep. Stephen Nolte, CEO of Sutter Health Plus, the insurance arm of Sacramento, Calif.-based Sutter Health, has said health systems should expect to spend in the neighborhood of $50 million to develop a project of this scope, which could limit other capital investments.
Mr. Williams of Evolent Health, which is a population health and financial risk management company created by UPMC Health Plan and The Advisory Board Co., says it's complex to establish a financially integrated delivery system from a standing start. For example, starting a health plan requires hiring or otherwise accessing new talent with experience in the space. Health systems also have to make sure they have the right strategies and infrastructure in place, such as obtaining necessary licenses, building broker and physician networks, designing and branding health plan products, driving membership (e.g., exchange participation) and deciding what type of health insurance (e.g., Medicare Advantage) to offer.
"It is a different business than operating a hospital or physician practice," Mr. Williams says. "Your local brand is at risk if you don't do this well."
Additionally, organizations have to consider how it will approach other organizations to build a provider network. One of the more innovative endeavors is taking place in Omaha, Neb.
The Nebraska Medical Center and Methodist Health System, the two main hospital providers in the area, joined forces to create a health plan network — the Affordable Care Alliance. This corporation manages a health plan that will test ways of paying for care that link reimbursement to the overall health of the nearly 17,000 people (NMC and Methodist employees and their family members) who use the network.
Previously, Methodist employees paid out-of-network rates for care at NMC hospitals and vice versa. Now, although the two organizations' health plans remain separate, both NMC and Methodist will be in-network providers for employees.
A lot of backend work is required to make a provider-operated health plan successful, but Mr. Williams says the benefits come in the long run. Aligning the delivery and payment of care, and the team members involved throughout, supports advanced analytics and more actionable and meaningful population health conclusions.
"There's a lot of subtlety here," Mr. Williams says. "If you're a provider organization that's trying to change the way you're caring for patients, you want more coordinated care that keeps people out of the hospital.
"It's a radical shift from the status quo," he adds. "The key is figuring out how to build enough scale and get paid for a new business model that's about delivering value versus driving volume."
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