Providers Feel Pressure to Launch Payer Initiatives

Widespread provider-payer integration appears inevitable, but health systems, hospitals, and physician groups face a years-long learning curve.

Healthcare providers are clearly interested in offering their own insurance coverage products for patients, but adoption is more like a steady flow than a flood.

In January, St. Louis-based Ascension Health became the latest large health system to embrace the health plan business, with a $50 million bid to acquire a Michigan-based insurance carrier. Officials at Ascension and US Health and Life Insurance Company declined to comment, but Herb Kuhn, president and CEO of the Missouri Hospital Association, says the proposed acquisition deal is a sign of the times.

"An increase in strategic partnerships is a natural extension of efforts to improve healthcare delivery between hospitals and among providers and payers. The shift from volume to delivery of value is fundamentally redefining relationships and structures. At the same time, these new organizations are gaining new capacity to look around the corner at a changing system and adapt to the new environment," says Kuhn.

He says the merging of provider and payer services into one organization has become a prime strategy in the healthcare industry to drive the retooling of American medicine. "It's connecting historically independent actors in the system to improve care and organizational performance. A team approach, with shared goals, will greatly accelerate clinical redesign efforts and assist in how the organizations reshape their medical management models. Moreover, it will help providers align their efforts, increasing patient and consumer engagement and enhancing the healthcare experience."

For many providers, taking on this strategy is easier said than done, according to a HealthLeaders Media intelligence report released this month. The findings of the report, which surveyed more than 300 leaders at health systems, hospitals, and physician organizations, offer several insights:

• Data is an enticement. 43% of survey respondents saying they are using payer data to better understand the care experience of patients.
• Size matters. 26% of health systems reporting ownership or operation of a payer business unit or health plan, compared to 16% of hospitals and 7% of physician organizations.
• Providers are wary. 28% of survey respondents reporting that they assessed whether to launch a payer business unit or health plan then decided against it. Only 16% of the healthcare provider officials reported owning or operating a payer business unit or health plan.

'Synergy Capture' Key to Provider-Payer Integration
Bill Copeland, vice chairman of New York-based Deloitte LLP, says it will take a decade for healthcare providers to establish successful models for incorporating payer business units and health plans into their organizations.

"Unlike the 1990s, when we saw health systems develop health plans then pull back, the market has changed enough that this is here to stay," he says. "There's been a lot of consolidation among providers. They actually have networks of physicians to work with. They have more expertise in managing care."

Copeland says the fact that providers are embracing payer functions is a predictable response to the revolutionary changes sweeping across the healthcare industry.

"It isn't doing the same things the same way they have for the past 50 years… It's very natural for industries to do this kind of vertical integration. It allows you to unlock value. You don't have to give up value to a payer. You can reward the right behavior in doctor compensation and increase value in care. You can change the setting. Care doesn't have to be in an office. It can be a nurse in a car driving around visiting patients."

While vastly higher levels of provider-payer integration appear inevitable, providers face several challenging obstacles, Copeland says.

"You have to have reserves. Providers are going to be regulated by new organizations that they're not used to working with. They need staff with new competencies that they're not used to hiring. There's a tension in provider and payer relationships, and [some providers] don't want to introduce that tension into their organizations."

Copeland agrees with one of the key findings of the HealthLeaders intelligence report. "I do think it takes a health system. You have to have a critical mass that creates something that will be interesting to your community. You have to ask, 'Do you have enough delivery system assets that would be adequate enough that you don't have to fill holes and gaps?' You need a strong balance sheet."

Providers who are considering payer initiatives should focus on the "synergy capture," Copeland says.

"The critical piece to making this work as a provider is taking advantage of the integration. This is not a standalone effort. It's the synergy capture. Ultimately, you will achieve more affordable care and improved patient experience. Unlocking the value is not being constrained by the ways we do things today. Physicians are eager for this kind of change. There is a long list of things that are constraining the system that, through vertical integration, you are able to unlock."

North Carolina Health System Committed to Bearing Risk
Last summer, UNC Health Care decided to offer a Medicare Advantage health plan in partnership with Irvine, CA-based Alignment Healthcare. Louisville, KY-based Humana was added to the partnership mix in November.

Allen Daugird, MD, MBA, president of UNC Physicians Network and UNC Health Care's chief value officer, says the MA health plan is off to a slow start but has been a good investment.

"We have about 1,600 enrollees and had hoped for more, but we're satisfied. Some of this we think is because the concept of a narrow-network HMO Medicare Advantage plan that requires signing up with a primary care provider is a new one for North Carolina. It was also a new product for Humana, who relied on their sales force, which might not have totally understood the Alignment model. And lastly, unexpectedly, Duke launched a new, similar narrow-network MA HMO in partnership with Aetna," he said last week.

"Successes include Alignment having three care centers operational by January and providing many 'jump start' visits to new enrollees, where a comprehensive medical evaluation occurs and bridge prescriptions are provided until patients get in to see their new primary care provider if they are changing practices. Having the Alignment Care Centers on UNC's version of Epic was also a success, and makes information sharing much easier and effective. Another success is that we have been able to develop permanent collaborative communication and problem-solving structures for providers and Alignment. Lastly and most importantly, seniors in Wake County North Carolina now have a new Medicare option that has the most extensive and cost-effective set of benefits available."
 
Daugird says UNC Health Care's MA health plan is a building block for the organization's future.

"We see the march toward value care and risk contracts only accelerating. The recent announcement by [the Centers for Medicare & Medicaid Services] about its plans to accelerate value payment programs underlines this. The state of North Carolina is also very interested in moving its Medicaid populations into risk-value programs. Employers and insurance plans are, too. To prepare for all this, we continue to build a population and value-care infrastructure to support care and cost management as well as the necessary IT and analytic systems."