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Providers Becoming Payers Integrated Delivery Model April, 2014

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Providers Becoming Payers - An Integrated Delivery Model To create an integrated care delivery and more integrated business model, hospitals are doubling up as an insurer. Driven by the healthcare reform; creation of health insurance exchanges; and a shift to population health; health systems are assessing opportunities of becoming a payer against the risk of taking this step. Hospitals and health systems, with a broad idea of their place in the healthcare delivery system, have started focusing on population health. They are looking beyond their own walls to accommodate their affiliated physicians, as well as their outpatient and home health resources. They are exploring ways to bring these entities together and work seamlessly to deliver a better product to the market in terms of cost and quality. It is expected that around 15% to 20% health providers intend to market their own health insurance plans. In 2010, a study conducted by the American Hospital Association found that 10% of community hospitals owned or were part of systems that managed health care plans. “Economies of Scale” is important to run a fully operational health plan. If hospitals are going to make this investment, they need enough revenue to support the effort. To offer effective health insurance coverage, the hospitals require a network which includes enough facilities and physicians to provide access and member convenience. For example, a provider may have a strong footprint in a particular area, but to market a viable product it requires a broader area, for which it might need a partner. Why Hospitals Are Entering Insurance Business Cost and reimbursement pressures, explosion of boomers in the hospital patient mix, and the movement toward population health are prodding health systems to launch their own health insurance plans. Launching their own insurance plans will help hospitals: • • •

Offset expected costs under the Affordable Care Act's Medicaid expansion, which will extend coverage to millions of uninsured U.S. residents; Compensate for declining reimbursement rates under Medicare and fee-for-service plans; and Better manage patients, by avoiding redundant tests or procedures and detecting patient problems early by allowing hospitals to track a patient's entire medical history.

Hospitals will also gain direct access to clinical data, claims data, lab results and pharmaceutical data that will provide a full picture of the health of patients, which would further lead to clinical discovery and care delivery innovations in the healthcare market. Consequently, hospitals that add a health plan will generate more revenue, which allows for more reinvestment in the community and, the system leads to a growing patient base. A growing demand by employers and government health policymakers to slow healthcare spending could be another factor causing hospitals to enter the insurance market. Recent Examples That are Reinforcing this Trend There is a growing list of hospitals and health systems that are taking the plunge and establishing their own health insurance companies. Here are some of the recent examples: Providers Becoming Payers: An Integrated Delivery Model

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Name of the Organization Catholic Health Initiatives

Detroit Medical Center (DMC)

Partners HealthCare

Steward Health Care System

Piedmont Healthcare WellStar Health System

and

Catholic Health Partners (CHP)

Tufts Medical Center and Vanguard Health Systems

Details of Health Plan

Rationale

 Acquired Washington state insurer Soundpath Health for $24 million  The insurer claimed 9% of the Medicare Advantage market in the nine Washington counties where it operated  Acquired ProCare Health Plan, Inc., a Detroit-based health maintenance organization that covers Medicaid beneficiaries in Wayne County  The final price was $6 million, plus a payment equal to the value of ProCare’s net equity

 CHI’s push is part of a broader strategy to expand its reach and control over healthcare delivery beyond the hospital  It plans to build its Washington state clinical network and insurance capabilities  The DMC has been trying to acquire a Medicaid provider in anticipation of an increase in Medicaid recipients  ProCare also gives DMC access to aggregated patient data from the health plan's claims, which can be analyzed to identify common diseases, allowing providers to tailor prevention and disease management programs and manage risk under new reimbursement model  The two organizations began the affiliation process in order to address growing needs for care coordination and management, health equity and the ability to curb healthcare costs.  The health plan, which will be administered by Tuffs Health Plans, will target small businesses throughout the state  It will offer employers health plans with premiums 20% to 30% lower than other providers  The collaborative will start out with 35,000 members, employees of the nonprofit Piedmont and WellStar systems and their dependents  The health plan is also seeking to offer coverage to employers with 50 or more employees, as well as a Medicare Advantage plan

 Acquired Neighborhood Health Plan, a nonprofit with 240,000 mostly low and moderate income residents in government health insurance plans  The company launched “Steward Community Choice”, which is designed to provide the majority of care in physicians’ offices and community hospitals

 Jointly developed a new health-systembased health insurance plan, “Georgia Health Collaborative”  The new Collaborative will establish services and initiatives focusing on the development of innovative healthcare delivery models, economically aligned physician relationships and the creation of service line cost savings  CHP will sell health plans on Ohio's health insurance exchange through its health plan subsidiary, HealthSpan  The company acquired Kaiser Foundation Health Plan of Ohio (KFHPO), and the physicians of the Ohio Permanente Medical Group, Inc. (OPMG) and merge them in HealthSpan  Jointly launched the health plan, “Minuteman Health”  The new insurer now has 25 hospitals within its network and 6,000 physicians. The network includes Lahey Health, Tufts Medical Center and its doctors group, New England Quality Care Alliance. It also includes the two Vanguard-owned hospitals, Metrowest Medical Center and St. Vincent Hospital  The company will launch its insurance operation, North Shore-LIJ CareConnect

North Shore-Long Jewish Health System

Island

 CareConnect will be a separate division of North Shore-LIJ, but its relationship allows it to structure its payment model with the health provider in a more integrated way than outside insurers

Providers Becoming Payers: An Integrated Delivery Model

 HealthSpan, a wholly owned subsidiary of CHP, has 22 years of experience in managing health benefit plans. It has been licensed to sell insurance in Ohio through the online exchange being set up as part of the Patient Protection and Affordable Care Act.  The Kaiser Foundation Health Plan of Ohio insures more than 80,000 people in the Cleveland and Akron areas  Plans will be sold through the Minuteman Health website, insurance brokers, and has already been approved for inclusion in the Massachusetts state health exchange, the Commonwealth Connector  The plans will at first include health care providers in seven counties. The plan is expected to include the whole state eventually.  The health system will offer its insurance both on the exchange and outside it, from storefront locations  Insurance plans for individuals and families will be sold in Long Island, Queens, Staten Island and Manhattan under the brand name North Shore-LIJ CareConnect

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Can Hospitals Run Health Insurance Plans Successfully? Predicting Healthcare trend can be quite tough with the ever changing dynamics in healthcare industry. But in the current scenario, it seems like hospitals’ entry into the insurance market is a natural evolution toward more integrated delivery systems. This is a “cultural shift” for hospitals, which presents risk to and a change in how healthcare will be perceived in near future; to make this endeavor successful, aggressive use of information technology and new incentives for physicians and hospitals that promote prevention and primary care will be required. For healthcare systems with limited scope, partnering with another system will lead to more coverage and members. On the flip side, patients’ reaction to a more limited network will remain a cause of concern for hospitals. Many hospital-run health plans folded in the mid-1990s, when patients revolted against the bureaucracy and the special authorizations necessary to see a specialist or go outside the network. Hospitals cannot flip a switch to transition from a provider to an insurer; Moreover, state and federal health insurance laws can trip many hospitals up as they go about their plans. All in all, it will be interesting to see how these hospital sponsored health plans will function in future in the ever evolving healthcare industry.

Providers Becoming Payers: An Integrated Delivery Model

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Providers becoming payers an integrated delivery model april'14  
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