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1 in 5 Health Systems to Become Payers by 2018

Margaret Dick Tocknell, for HealthLeaders Media, August 20, 2013

For providers the health insurance business model is often a narrow network—typically comprising their own hospitals and affiliated physicians—that can be closely managed to control cost, quality, and coordination.

However, a marketplace reality is that scale is important. "If you're going to make this investment, you need enough revenue to support the effort," states Williams.

To offer effective health insurance coverage requires that a network include enough facilities and physicians to provide access and member convenience. While a provider may have a good strong footprint in a particular geographic areas, to have a viable product may require a broader coverage area. That probably means taking on a partner.

As a case in point, Williams offers the alliance between Piedmont Healthcare and WellStar Health System. Piedmont is strong in Atlanta's southern suburbs, but really needed a broader geographic coverage to offer a competitive insurance product. WellStar, with its presence in Atlanta's west and northwest suburbs, fits the bill. The two plan to offer commercial and Medicare insurance next year.

But jumping into the health insurance game is not a parlor game. Williams notes that decades ago hospitals and health systems lost a lot of money trying to take on capitation and broader risk.  

Also, shifting from provider to provider-payer is a huge cultural change that involves thinking beyond managing facilities and capacity to a more holistic approach to patient care. "It's a different mindset," says Williams.


Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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2 comments on "1 in 5 Health Systems to Become Payers by 2018"


J.Fontaine (8/21/2013 at 11:56 PM)
So do I understand correctly? Company A conducts a survey that appears to support the apparent market direction to align with Company B's services, which are presented here in the article. Company A co-founded/funded Company B with no mention in the article. Did I get that right?

bob sigmond (8/20/2013 at 1:54 PM)
Health systems are better advised to avoid setting up a competitive insurance plan. Rather, they should contract with a single, competitive, reform-minded insurer to [1]completely take over the pricing, billing and collection functions, canceling the costly contracts with collection agencies and [2] guarantee to pay the provider organization with a single monthly check, covering all patient income included in a collaborative annual budget that is based on a collaborative strategic plan to achieve Berwick's TRIPLE AIM for example. Of course, the contract would provide for a jointly governed, well staffed fund to monitor monthly budget reports and to make recommended adjustments whenever expenditures were exceeding patient income. At the same time, the fund would be available for covering capital expenditures when actual income was exceeding expenditures. The contracting provider organization would no longer have any worries about a negative bottom line, no more adversarial relationships with patients and other sources of payment, and no more involvement with fees-for-service. Their staff involved in the collection processes would become employees of the contracting insurer, stay on the provider site, and continue to be closely involved with the provider staff in serving patients collaboratively. The insurer would help the provider organization to make the cultural transition beyond exclusive focus on patient care to incorporate a much broader focus on less expensive population care, while also gradually increasing revenue from a much broader, patient -focussed approach to collections than the narrow perspective of the commercial collection agencies. One of W[INVALID] McNerney's powerful insights was his notion that providing and paying for patient care are two sides of the same coin. Except when both sides of the coin are entirely within the same organization, as in Kaiser-type HMO's, putting competitive financing elements on the provider side of the coin always leads to disaster. For insurers, collaborating with a trusting provider organization , taking over its collection function entirely, assures a significant role in the future as the key intermediary between the sources of the money and the provider. Insurers which do not rise to the challenge will probably [INVALID] out, as the insurer function becomes subordinated to the real role of the insurer as the intermediary third party payer for all sources of payment to each provider organization.