As a follow-up to this morning’s post on building networks, the blindingly obvious became obvious to me on a reread. One of the big sources of new entries into the insurance industry has been the creation of provider-sponsored plans or integrated delivery systems or payer-provider systems (all the same thing, just depends on what set of buzzwords you hear and who you are trying to impress). I’ve always looked at these from a population health management perspective as the ACA has created very strong incentives for provider groups to get a handle on managing risk through the proliferation of gain sharing, ACO and shared savings arrangements.
Modern Healthcare has a good article on them from last April:
Premier Health, part-owned by Catholic Health Initiatives, took its first step into the insurance business last year. After acquiring a state insurance license in 2013, the system in Dayton, Ohio, offered its own health plan for its 17,000-plus employees and their family members….
This year, Premier Health Plan is moving beyond its employees. It now covers 7,100 Medicare Advantage members and 2,000 individuals and families, most of whom signed up through the federal insurance exchange in Ohio….
Provider-owned health plans like Premier’s continue to spring up or get larger as more hospitals and physician groups are moving to take on financial risk for their patients under value-based and capitated payment contracts…..
Stupid me, I totally neglected the barrier to entry of establishing a basic network is effectively removed when a provider system becomes an insurer. They already have a provider base that is obligated to take the best offer that the insurer can give them, and depending on what the CEO and CFO desire to be their legacy, those providers are likely to accept something that is far removed from an arms length best offer.
Most of the motivation for the recent round of provider-sponsored plans is still an attempt to get a handle on new ACA requirements and revenue opportunities, but large providers offering plans also benefit from the significantly lower cost of information and entry into the insurance market which is further enabled by the initial cost to get their network and membership base to viability is far lower than a traditional insurer.
This is just something I should have thought about a year or three ago.
Mudge
UPMC did that in Pittsburgh. Pissed the other health insurance companies off mightily.
Renie
I have had a question for you but keep missing a current thread to ask. We have clinics popping up around here (NYC metro area) called Pro-Health. We have used them, they’re not bad though waiting time is hit or miss. But just recently a friend told me her doctor’s office had been bought by them so she has to go there and get whatever doctors are available rather than seeing her regular doctor.
Do you think these type of places are the trend now? And I’m wondering how is the money behind them.
Barbara
Providers have been establishing health plans that revolve around themselves as networks for a long time. The problem has been that in most places, only hospitals are big enough to do this but the provider mindset usually trumps the payer mindset, and hospital care is expensive. So, basically, the insurance component becomes a funnel for referring insureds to the provider, and usually becomes substantially more expensive than competing plans, which are far more interested in keeping people out of hospitals. This is not ALWAYS the case, but it has been the case often enough that many, many providers sold their health plan operations over the last 20 years, after starting out fairly strong in the late 80s and early 90s. Providers have also not typically had the scale to maintain lower administrative overhead for their insurance operations. In California, large physician multi-specialty groups (“mini-Kaisers”) also do this (such large groups exist only in a few places in the rest of the country). They don’t care if their patients are feeding a pipeline to a hospital. So it will be interesting to see the resurgence of this model.
Katy
“part-owned by Catholic Health Initiatives …” – any notion of how the issues of women’s reproductive health might be handled in such a provider-sponsored plan?
Barbara
Katy: Not well or not at all, outside of a few states that do not include Ohio.
Richard Mayhew
@Barbara: ditto