Florida Hospital, Health First to Create Health Plan

In a joint venture, Florida Hospital Healthcare System and Health First Health Plans will partner to form a commercial health plan in Central Florida. The coverage area will include Tampa, Orlando, and Daytona Beach.

Florida Hospital and Health First Health Plans are partnering to create a commercial health plan that will serve 10 counties across Central Florida.

The new plan, which is expected to be operational on the state's health insurance exchange by mid-2014, will be a joint venture between Florida Hospital Healthcare System, which administers employee health insurance for Florida Hospital, and Health First's Brevard County, Florida subsidiary. A formal agreement is expected to be in place by the end of 2013.

Mike Schultz, president/CEO of the 23-hosptial Adventist Health System Florida Region, says the joint venture creates an opportunity to improve patient outcomes while attempting to contain the unsustainably high medical inflation.

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"Florida Hospital's footprint is pretty big in Central Florida, so we believe we have the size that can have a positive impact on the medical spend," Schultz says.

"We believe that payers have to be aligned with providers to lower that medical spend with an emphasis on health and wellness. Right now we get paid when people are sick, so there is no incentive for us to keep them out of the hospital. We believe that aligning with a payer like Health First will provide us with the opportunity to focus on health and wellness and then over the course of time we believe that will bring down the health spend that will help our governments and our employers."

FHHS operates healthcare networks in 10 Central Florida counties stretching from Tampa to Orlando to Daytona Beach, with 23 hospitals, 22 urgent care centers, more than 4,000 physicians and ancillary providers. FHHS also provides third party administrative services for employers in the region.

Health First is Central Florida's only fully integrated health system, with more than 7,500 employees and four hospitals. Health First Health Plans offers plans in Brevard and Indian River Counties. Health First Medical Group is the largest multi-specialty physician group on Florida's Space Coast.

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Adam Powell, a healthcare economist, says the new partnership is "yet the latest in a series of narrow network plans that have emerge in response to healthcare reform."

"These plans tend to offer people high-value care delivered from a concentrated set of providers in their area," says Powell, president of Boston-based consultants Payer+Provider.

"By keeping patient panels within a health system, these integrated plans make it easier for providers to manage the cost and quality of care. By encouraging patients to a house brand health plan, Florida Hospital can more fully capture profit across the healthcare value chain and can more firmly manage patients' care. The plan has the potential to improve the quality of care, as when patients stay within a health system, they tend to have better continuity of care and to have more complete medical records."

Schultz says the arrangement with Health First and the gradual roll out of the plan over the next three to five years allows Florida Hospital to position itself to become "owners of a health plan over time, and that helps align incentives."

"A number of systems that have the size are looking at areas of where they can get into the payer side of the business," he says. "We decided to go with Health First as opposed to building our own insurance company from the ground up. That was more of a speed-to-market deal. It's not unique from the standpoint of strategy that a number of people are doing. Payers are already buying physicians and I believe you will see payers buying hospitals to incorporate the same strategy. The incentives need to be aligned, whoever is doing it."

Powell says that Florida Hospital is hardly alone in its desire to manage more patient risk.

"The Advisory Board recently announced that of the 100 hospitals it surveyed, 34% responded that they already own health plans and 21% responded that they planned to launch a health plan by 2018," he says. "While Florida Hospital Healthcare System has experience operating as a third-party administrator, the partnership with Health First brings it the competencies it needs to launch commercial and Medicare plans."