Trend: Many Healthcare Systems are Becoming Provider-Payers

by webadmin on August 23, 2013

INS-thumb1Forecasting healthcare trends is a lot like predicting the weather: your odds of being right are largely dependent on the shifting winds.

However, here’s a trend that seems to be as certain as the gathering storm clouds on the horizon: healthcare systems–in an effort to adjust to reform, health insurance exchanges, population health, cost and reimbursement pressures, and more baby boomers in the patient mix–are gradually becoming health insurers, according to an article by Margaret Dick Tocknell at HealthLeaders Media.

Tufts Medical Center in Boston, Vanguard Health Systems, Catholic Health Partners in Cincinnati, North Shore-Long Island Jewish Health System, and Piedmont Healthcare and WellStar Health System in Atlanta are some of the healthcare organizations preparing their own health insurance plans.

In fact, Tocknell reports, “in a June survey of more than 100 hospitals and health systems across the country, 34 percent responded that they already own health plans. Another 21 percent said they plan to launch a health insurance plan by 2018, according to the Advisory Board Co., a Washington, D.C.-based research and consulting firm.”

Evolent Health in Arlington, Va., is devoted to helping hospitals and health systems overcome the hurdles of being provider-payers. CEO Frank Williams told Tocknell this trend is largely economic, and it’s this “economic piece that is really creating urgency to change the way organizations care for patients and ultimately [change] the way they are paid.”

Williams also said “with the focus on population health, hospitals and health systems now have a much broader view of their place in the healthcare delivery system. They look beyond their own walls to their affiliated physicians, as well as their outpatient and home-health resources. They are exploring how to bring these entities together in a more seamless way to deliver a better product to the market in terms of cost and quality.”

He added that insurance from small employer groups has an appeal “because their coverage decisions are based on the local healthcare network where their employees get most of their care.”

In order to produce a solid ROI on such an endeavor, some healthcare systems with limited scope may have to partner with another system in order to have more coverage and more members. This is what Piedmont and WellStar have formed.

Tocknell writes, “Piedmont is strong in Atlanta’s southern suburbs, but really needed a broader geographic coverage to offer a competitive insurance product. WellStar, with its presence in Atlanta’s west and northwest suburbs, fits the bill. The two plan to offer commercial and Medicare insurance next year.”

However, for a health system to do this takes a great deal of planning and transformational perseverance. As Williams said, “It’s a different mindset” for a culture so rooted in the traditional healthcare model.

As healthcare executives, what is your opinion on this trend? Are you part of a system or hospital that has become a payer? Why did you choose to go this route and what were the lessons you learned? Do you think this is a beneficial path for other organizations to pursue?

-by Pete Fernbaugh

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