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As Payers Merge, Hospitals Dream of Their Own Health Plans

‘Superjumbo’ insurance companies threaten to call the shots

Hospital and health-system leaders are facing the prospect of merged insurance giants that are so big and powerful they can call the shots in what will pass for “negotiating” a contract, prompting some to consider the alternate path of starting their own health plans, according to an article posted on the HealthLeaders Media website.

The option will become more appealing if insurance company mergers go through as expected and if the combined companies start bullying hospitals that have few competitors from which to choose, author Gregory A. Freeman says.

Hospital leaders will find that starting their own health plans can be a major challenge and the right choice only in particular circumstances, analysts have pointed out.

No hospital system will make a move immediately, but recent merger activity has given new life to the idea of starting a health plan, said Jeff Jones, managing director at the consulting firm Huron Healthcare in Atlanta. The idea may be tempting, but Jones noted that many hospital leaders have been burned by it in the past.

“Some health systems did get into the insurance business a couple of decades ago and realized it is a very different business and requires a different set of skills to be successful,” he said. “Some who struggled with that are reticent to do it again. I don’t think they’ve taken the idea off the table, but they want to wait and see how the insurers use their new clout.”

The mostly likely hospitals to try forming their own health plans are not the biggest players in the business, Jones said. The biggest hospital systems with the most resources and capabilities to operate their own health plans will also be big enough to still have negotiating power even with the newly formed giants, he noted.

Most smaller hospital systems will find the strategy too expensive and labor-intensive for their means, Jones said, so the only ones likely to seriously consider starting their own health plans will have to be in the awkward position of being big enough to have the resources, but not big enough to have much leverage with insurers.

The creation of another “superjumbo” insurer like United Healthcare or the new Aetna offers as many disincentives as incentives to a hospital starting or acquiring its own health plan, according to Frank Ingari, CEO of NaviNet, a Boston-based health care collaboration network. The hospital would, in effect, become a competitor of entities that already control huge shares of available patient lives.

Medicare Advantage represents the business model and coordinated care model that will be necessary to succeed in health care, Ingari pointed out. That will be the case whether a hospital decides to become a hybrid payer/provider or remain a “pure play,” he said.

The Medicare Advantage business model demands the development of particular skills that will be keys to success in future health care operations. The best way to develop these skills is to participate in the unique closed-loop learning system that is Medicare Advantage, Ingari said.

Paula Wade, principal analyst for Decision Resources Group in Burlington, Massachuetts, suspects that hospital systems will find starting their own plans to be too risky and expensive. If a hospital system has built the capacity to take on risk and to do population health management, it is probably better off forming a co-branded system, such as Aetna’s partnership with Carilion Clinic in Roanoke, Virginia, she said.

Source: HealthLeaders Media; July 10, 2015.

 

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