As health systems accept increased risk under healthcare reform, partnerships and provider insurance plans may also lead to greater rewards for hospitals and doctors
Even as pathologists, clinical laboratories, and other medical service providers adapt to value-based care initiatives and bundled payment plans, health systems are looking for ways to optimize both quality of care and treatment costs. In some cases this is the reason behind new joint ventures between provider and payer organizations.
The two partners created a newly licensed insurer called the Wisconsin Collaborative Insurance Company (WCIC). With both Anthem and Aurora Healthcare investing $5-million in the new insurance company, they will split equally any profits and losses derived from their new commercial health plan—Well Priority.
The plan includes services with 15 Aurora Healthcare hospitals as well as choice providers throughout the state. The first commercial plan will be available to fully insured and self-insured employers, with service starting January 1, 2017.
In the press release, Larry Schreiber, CEO of WCIC, stated, “For years now, Blue Priority has been creating the right kind of healthcare competition by advancing issues of cost and quality. Now, through Well Priority, we are working to further simplify healthcare so our members can focus on their health and live well.”
Improving Quality of Care and Efficiency in the Face of Healthcare Reform
Speaking with Modern Healthcare about the joint venture, Nick Turkal, MD, CEO of Aurora Healthcare said, “If you bring the power of a major national insurer together with a large regional healthcare system and let them both do what they are good at, you begin to get a better solution for the patient.”
WCIC markets Well Priority as a high-touch, patient-centric insurance plan. Their hope is that by combining medical records from health systems with the billing information of Athena, they can uncover gaps in coverage or treatment and offer a higher level of preventative care. By encouraging a healthy lifestyle and providing preventative care, they hope to reduce overall costs when compared to relying on acute care to treat conditions.
A Recurring Trend with Questionable Success
This isn’t the first time that health systems have tried to integrate insurance services. Speaking with Becker’s Hospital Review, Lisa Goldstein of Moody’s Investors Service noted, “[Healthcare] is a very cyclical industry. In the mid-1990s, many health systems became vertically integrated. The hospital was the core business, but management also decided to go into the insurance business like we’re seeing today.”
However, by the early-2000s, many found that the financial risks did not pay off. This time, thanks to the Affordable Care Act (ACA) and other healthcare reforms, health systems may find increased benefits. Peter Weiss, MD, Chief Medical Officer at Adventist Health System in Florida, highlighted this in a 2013 interview with Becker’s Hospital Review. He stated, “Through payment changes, the ACA is creating incentives for provider systems to manage the entire process of care. This is easier when the provider system is also the insurer and can align the incentives of all parties around the health of the member.”
However, past obstacles to success remain relevant today. Creating a health plan from the ground up requires extensive knowledge, infrastructure, and staffing. This leads many health systems to partner with existing insurance providers, or to purchase existing plans.
Both options present unique administrative and financial challenges. Purchasing an existing plan requires detailed analysis to integrate services and coverage to meet the requirements of both patients and health systems. Partnering with an existing insurance provider might create tension between the health system and other insurance or service providers as well.
Data recently released by McKinsey & Company analyzed the performance of 89 provider-led health plans (PLHPs). Nearly half of the plans had negative margins in some or all of the past three years. Both medical loss ratios (MLRs) and administrative loss ratios (ALRs) increasing from 2010 to 2014 across most businesses.
Despite these figures, PLHPs are showing steady growth. The same data shows an average increase of 6% across the same period. As healthcare reform continues to change the way health systems operate, partnerships and consolidation will remain leading methods for adapting to changing regulations and supporting growth.