A Plan of One's Own: The Payvider Outlook for Health System CFOs

In an insurance market rife with discord and denials, when, if at all, is BYO the way to go?

Editor's note: This story is the first in a two-part series on how health system CFOs can help melt the payer-provider freeze.

As reimbursements dwindle and denials mount, some health system CFOs are eyeing insurance plans of their own to weather the storm.

Aside from staving off skirmishes with external payers, proponents say it's a way to boost care quality, integration, and affordability for their communities.

But that doesn't mean it's easy going.

"It is not for the faint of heart," says Robin Damschroder, MHSA, FACHE, executive vice president and chief financial and business development officer at Henry Ford Health (HFH), which has more than 250 care locations, including five acute care hospitals; more than 33,000 team members; and upward of 650,000 covered lives throughout Michigan. "You do have to live through the insurance cycles."

For HFH—whose Health Alliance Plan (HAP) was born in 1960 from automaker union and community members championing high-quality, affordable healthcare—that's meant braving everything from the genesis of DRGs and tightly managed care in the 1980s and 1990s to the emergence of Medicare Advantage in the 2000s.

Sure, it's a rollercoaster, but success is possible with staying power and prowess, financial execs and experts tell HealthLeaders. Ahead, some tips for stout-hearted CFOs mulling a payvider play.

Why (or why not) now?

While value-based partnerships between payers and providers have been around for years, payvider models, which involve a contractual or joint ownership arrangement between the two entities, have gained popularity in recent years amid forces like intensifying financial strain, an aging population, and a redoubled emphasis on the quadruple aim.

In a 2021 Guidehouse and Healthcare Financial Management Association (HFMA) survey of health system CFOs and finance and managed care executives, more than half of participants indicated that they were pursuing payvider model(s), including shared-risk/capitation payment arrangements (54.7%), direct-to-employer partnerships (47.4%), provider-sponsored health plans (32.8%), and payer/provider joint ventures (30.7%).

Today, though, shifting winds are fanning "flames of conflict" and forcing reconsideration, says Richard F. Bajner, partner and payer and provider leader at Guidehouse.

During the peak of COVID, payment "very much tilted in favor of health plans," Bajner explains. Now, things are "tilting a little bit back the other way," he says, pointing to a March MedPAC report, which recommends increased Medicare reimbursement for hospitals in 2025.

That means health plans may be feeling a financial pinch. "So now you have two parties that are saying they're financially challenged, and one needs to save more money and the other one needs more money, and how do we get past that?" asks Brian Fisher, Guidehouse's director of healthcare strategy, provider and payer. 

It's an impasse that could shape a new state of play, including a "mutual growth agenda," as soon as next year, Bajner says, assuming we can muck through "all the mudslinging."

In the meantime, there's a bit more trepidation when it comes to payvider models—even the provider-sponsored kind—compared to what we were seeing five or 10 years ago, Fisher says. "Capital is a challenging thing to overcome and getting to scale is equally as challenging."

And when the going gets tough, "delivery systems start to get out," Damschroder says.

So why bother?

Payvider proponents see provider-sponsored plans as one way to wrest back some control over reimbursements and reduce wrestling matches with external payers doling out denials.

And, they argue, it can be just as rewarding for the communities they serve. The model provides "a microcosm" where providers can "manage the value-based care," says Richard L. Gundling, FHFMA, CMA, senior vice president of content and professional practice guidance at HFMA.

Indeed, Henry Ford Health's value-driven approach has brought "a lot of success" in the quality arena, Damschroder says. As an example, HAP's covered lives have consistently earned high NCQA scores for services like HbA1C control and breast cancer screening. "When you combine being the insurer with being the provider, you get a lot more flexibility of what you can decide to do as it relates to programming and driving engagement and health and the outcomes that you're seeking."

Plus, the model can be a hotbed for innovation, creating opportunities to "pilot and try out and incubate different kinds of care and insurance models that could get us that much further," Gundling says. "And maybe to eliminate some of the denials."

What does success look like?

It's no surprise that competition is fierce, with "really large national companies" like UnitedHealthcare and Aetna CVS Health expanding their footprints across government and commercial markets, Damschroder says. So partnering up can make all the difference.

"We, as integrated delivery systems and provider-sponsored payviders, are going to have to think about things that we can do together to help us compete," she explains.

In January, for example, HAP teamed up with managed care provider CareSource on a state Medicaid bid, a move enabled by the pair securing regulatory approval last year to pursue a joint venture. The decision, Damschroder says, stemmed from the desire to create "comprehensive capabilities that would actually change the outcomes we see here in the state of Michigan."

It's something that would be hard to deliver alone.

"We all want to meet our benchmarks for quality, safety, experience, and financial outcomes, but truly, when we come together and look at it, and we put that partnership together, it was really, how could we do better?" Damschroder recalls. "And we owe the state of Michigan to do better."

This isn't the first time Henry Ford Health has collaborated to better serve their state.

The system joined forces with MSU Health Care in 2022 to launch the HAP MSUHC Medicare Advantage HMO plan, an early output of the pair's 30-year partnership announced in 2021.

Available to Medicare-eligible individuals throughout Michigan, the plan features a $0 premium and $0 primary care provider copay, plus a flex card to use on benefits like dental, vision, hearing, and companion services. Members have access to HAP's full HMO network of more than 50,000 practitioners across the state.

Pictured: Robin Damschroder, MHSA, FACHE, executive vice president, chief financial and business development officer of Henry Ford Health. Photo courtesy of Henry Ford Health.

Building on successes in the plan's first full year of operation, the 2024 offering expands availability to individuals in 48 Michigan counties, compared to 46 at launch. And it has provided a springboard for MSU Health Care to announce its intentions to introduce additional MA plans on the employer front, along with insurance products in the commercial arena. "We want to get in the game and be what is the future of healthcare: a payvider," MSU's CEO, Seth Ciabotti, said on a recent podcast.

What does it take?

Clear benefits aside, getting an in-house offering up to scale at speed is a big challenge.

"What we've seen over the past 10 to 15 years is provider-sponsored health plans that are really challenged to grow a large enough market share or bolus of members to mitigate risk, particularly in a new insurance company," Fisher says.

To ramp up, providers often accept "significant discounts on their own health plan," Bajner explains. And with capital constraints being what they are today, CFOs should ask themselves whether these cuts, which can be as high as 30% to 50%, are the right move.

Here's what can make the juice worth the squeeze.

Analysis: You need a good read on the regulatory environment, especially for government payers, as well as the competitive landscape for commercial entities, Damschroder stresses. And that includes what's on the horizon. "We've had to change with the times as different programs and different emphases come into play," she says. Without this expertise and foresight, "you can lose a lot of money, and then quickly, it feels like a money pit."

Capability: Sponsoring a health plan requires "a completely new set of capabilities, particularly on the administrative end, that, without a partner, have to be created from scratch or contracted out," Fisher says. So prioritize finding the right collaborator—or developing the requisite skill sets in house, Damschroder advises.

Balance: Ensure your offering covers people in a range of health circumstances, or risk getting "kicked out of the market," Damschroder says. "When you look at the COVID cycle that's just gone on, there's been a lot of volatility in medical claims, right, and you actually have to have the fortitude to maintain your risk-based capital with the department of insurance in your state," which wants to know that you're "investing and supporting the medical claims activity."

Stamina: This isn't "a get rich quick scheme," Damschroder says. "You have to be in it for the long term; it's not a three-to-five–years game where you're automatically going to be making money." It means "doing what's right for the community and getting those health outcomes," as well as "pricing reasonably" and making enough profit to cover losses, particularly in the Medicare and Medicaid domains. Also look for openings in the market. As an example, UnitedHealthcare is focused on profitable services (e.g., ambulatory and physician) and "staying away from hospitals," Damschroder says. "That would be our domain."

(More) collaboration: "Many times, even within a health system that has a payer and a provider side, they still are not as close as you would think they were," Gundling says.

That's because infighting can flare around competing priorities, such as how to handle administrative hurdles like prior authorization and medical necessity. And it's the patients who suffer most.

"If somebody really needs back surgery, let's not delay it for three months to get them that surgery or to have them scared that they're going to get a huge bill at the end of it," Gundling says. "They're having back surgery. Let's alleviate that other stuff."

It takes a balancing act, Damschroder says. "Culturally, you have to be suited for that tension, and I think you also have to be well invested in the health of the population—of what you can do together, versus separately," she explains. 

Henry Ford Health has worked hard over the past two years to integrate its care management team across its provider and payer entities. The partnership has produced a protocol of care that limits pre-authorization requests between HAP and HFH to a handful of circumstances, such as when certain new drugs are in play or there's variability in how a service is being delivered across the system.

"Our clinicians and our medical management team at the plan have been able to come together to develop processes that aren't an administrative burden, don't cost a lot of money, and better yet, the patients' speed to care treatment is quicker," Damschroder explains.  

Resolve: If a plan of your own is the right fit, don't let the challenges scare you away from a model that could improve care quality, access, and affordability for those you serve. "We're highly integrated into our communities, and I think we're a very important part of this ecosystem," Damschroder says. "There's a danger if we just hand this over."