Provider-Sponsored Health Plans: A Tool for Moving Toward Value-Based Reimbursement

Abstract

THE US HEALTHCARE SYSTEM is undergoing unprecedented change, particularly for this generation of healthcare leaders. The mandate to improve the patient experience of care (including quality and satisfaction), improve the health of populations, and reduce the per capita cost of healthcare-the Institute for Healthcare Improvement's Triple Aim-is being embraced by healthcare leaders across the country.A major driver in achieving the Triple Aim is the transformation of the reimbursement system from one that pays providers on the basis of volume to one that pays providers on the basis of value, rewarding (or penalizing) them for performance in managing cost, experience, and outcomes. Economically, this transformation calls for significant systemic change. The current fee-forservice payment structure cannot support the investments required to transition to a value-based reimbursement system or the threat this transition poses to provider income. Providers must retool to be able to accept performance risk. The authors of the two feature articles in this issue of Frontiers describe Spectrum Health's and Health First's experiences that led these organizations to take on risk at its highest level: to participate directly in a health insurance product.Entering the health insurance business is not for the faint of heart. Healthcare systems must carefully assess their capabilities, the competitive landscape in both provider and health insurance markets, and their tolerance for risk. Owning a health plan is not the right solution for all providers and all markets, but it is an option health systems may consider as they develop the capabilities required for a value-based reimbursement system. The strategic benefits to going down this path also differ, as Breon describes for Spectrum Health, a not-for-profit, integrated delivery system based in Grand Rapids, Michigan, and as Johnson outlines for Health First, a not-for-profit community health system based in Rockledge, Florida.Johnson notes that one of Health First's primary goals is using the health plan strategy as a catalyst for developing an integrated delivery network (IDN). Breon views Spectrum Health's decades-long experience with its health plan, Priority Health, as a key driver in achieving its mission to improve the health of the communities it serves and deliver on its value proposition. After a comprehensive self-assessment, Froedtert Health, based in Milwaukee, Wisconsin (Exhibit i), determined that health plan ownership, in alignment with other strategies for its clinically integrated network (CIN), offered a unique opportunity to take the next step in assuming risk and delivering value directly to our community.THE DECISION TO PURSUE HEALTH PLAN OWNERSHIPAlthough Froedtert Health's deliberations regarding health plan ownership took a different course than Health First's and Spectrum Health's did, it included an evaluation of many of the same factors addressed by Johnson and Breon. With passage of the Affordable Care Act and the resulting movement by the federal government and private payers toward valuebased reimbursement, Froedtert Health's management team concluded that the organization needed to improve its capability to assume and manage more financial risk than its fee-for-service contracts allowed. The alternative would be reduced rates for each unit of service (e.g., a hospital stay) and reduced utilization, with no reward for the work we, as providers, were doing to manage care. However, the management team determined that the health system was not large enough to serve our market on its own. In addition, having the region's only academic medical center (Froedtert and the Medical College of Wisconsin) in our network would significantly increase the risk of adverse selection in any population attributed to our management.Several executives on our team had had previous success in developing CINs that allowed independent providers to interact collectively with the market (i. …