Provider-Sponsored Health Plans: Are They Right for You?

Abstract

As WE struggle in the United States with healthcare costs that are two to three times greater per person than those in other Organisation for Economic Co-operation and Development countries, employers, individuals, and the federal government are forcing providers to deliver higher-quality care at a lower cost while improving the health of populations (i.e., the Institute for Healthcare Improvement's Triple Aim). Much hope is being placed on alternative payment models and the creation of accountable care organizations (ACOs), a newer version of the integrated delivery network. What is the role of the providersponsored health plan in the evolution of healthcare? Past precedent suggests that if the hospital provider's health plan is treated as a competitor and is not truly integrated into the health system, it will be destined for acquisition when the parent company or hospital provider needs capital.MissionThe authors of this issue's feature articles are to be congratulated on the success of their systems' health plans and their journeys in creating true integrated delivery networks (IDNs). Both systems-Health First in Florida and Spectrum Health in Michigan-have used their health plans to fulfill the mission of improving the health of their communities at lower costs. This evolution has taken place over 20 to 30 years. Their IDNs have survived because leaders at the parent organizations believed in their mission, and because the systems were able to integrate the assets that a health plan brings to provide value to hospitals and providers. These assets are not just financial-they also include expertise in quality and population health management, as well as the ability to see the big picture of the total cost of healthcare.A hospital may pride itself on being able to discharge a patient after a total joint replacement in three days, but if that discharge results in a 30-day stay in a skilled nursing facility, Medicare has spent more than if the hospital stay had been a little longer and the patient had been successfully transitioned to home. The Centers for Medicare & Medicaid Services is working aggressively, through its payment penalties, to push systems to develop ACOs or IDNs to manage the total cost of care, a concept that may be foreign to many hospitals. Other payers will quickly follow suit, if they have not already done so. Surviving these changes is the challenge for hospitals and other providers in this new world. For example, consider Kodak, which invented the first digital camera but refused to cannibalize its lucrative film processing business to make the necessary investments in digital technology (Miu 2012). Similarly, hospitals are accustomed to filling beds and advertising their short emergency department waits to increase revenues. In the new world of healthcare, however, these are cost centers in a true IDN, not revenue centers.This shift is a real challenge for trustees of nonprofit healthcare organizations. As Michael Jellinek, MD (2016,1699) points out, trustees are used to gauging success by the number of admissions, outpatient visits, and ancillary services. However, population health management also offers trustees the opportunity to support better care of patients at a lower cost and thus better fulfill their responsibility to the patients they serve and the community they represent, he notes. Even when the system has a health plan, it is difficult to stop thinking that these metrics define success in the new world.Advantages of ProviderSponsored Health PlansCommunity-based (and usually not-forprofit) healthcare systems have a number of advantages: connections to their communities, a long-term focus on improving population health, and freedom from accountability to shareholders for quarterly performance. For such systems, moving toward the Triple Aim requires an engaged board that is not afraid of taking the risks necessary to build a health plan and see it through the inevitable cycles of profits and losses. …