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Under M&A Pressure, System Launches Medicare Advantage Plan

Analysis  |  By Gregory A. Freeman  
   April 18, 2018

A not-for-profit health system in Florida is launching its own Medicare Advantage plan. The local market has plenty of competition but the system sees the health plan as the right move.

With innovation and bold ideas driving boardroom decisions lately, health care provider BayCare Health System in the Tampa Bay area is launching its own Medicare Advantage (MA) plan despite strong competition and potential market saturation.

The move is another example of how players in the healthcare industry are feeling pressure to expand, combine, merge, and evolve.

BayCare Health System will launch BayCare Plus in January 2019, partnering with Lumeris to manage the day-to-day operations.

The health system is located in one of the nation's fastest growing Medicare markets, but that market also is near saturation, says Jim Beermann, president of BayCare Select Health Plans.

Beermann estimates there is 45% market penetration for MA, making the Tampa Bay area one of the more competitive markets in the country. No single plan dominates the market, however.

Despite the substantial competition, BayCare's analysis still indicated that a new MA plan was the right choice.

"The Tampa Bay and Polk County areas we serve have more than 800,000 Medicare-eligibles who live here full time, and that doesn't even count the snowbirds," Beermann says. "For a system of our size, with 15 hospitals and numerous employed physicians, close to half of our services is providing care to the Medicare population."

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Beermann notes that BayCare Plus will not be a BayCare narrow network.

It will contract with other significant health systems and hospitals in the area, he says, and the MA plan will not set up tiered benefits to drive volume to its higher-cost facilities in the market.

"We plan for this to be a collaborative effort not only within our health system but with other health systems in the market as well," he says. "We think that will provide us with a fairly broad network that will help us be competitive."

MA outlook good overall

MA plans offer promise for health systems looking to expand into the insurance market, according to a report from KPMG.

The 2018 Healthcare & Life Sciences Investment Outlook concludes from a survey of more than 250 corporate finance executives that they have a favorable outlook for MA plans, though the company cautioned that growth may be tempered by overvaluation.

BayCare's decision to enter the MA market was driven in part because of how the healthcare industry is seeing so much consolidation and blurring of traditional lines, Beermann says.

The recent announcement of a proposed merger of Walmart and Humana is the latest example of a mega-deal, but Beermann says the same reasoning behind such big moves is also motivating decisions like BayCare's entry into the MA market.

Staying in only the traditional line of business for a health system is a sure way to be left behind, Beermann says. BayCare is following the lead of others in the industry and looking for creative ways to extend its reach, he says.

"The lines have been blurring over the past couple of years and they will continue to do so. A lot of managed care plans have been purchasing physician practices, and other provider organizations have been getting into insurance," he says. "It's becoming increasingly difficult to understand."

Building to scale quickly

BayCare's MA plan will help it focus more on wellness and preventive care, he says.

Once that path was chosen, BayCare then had to decide how to launch the health plan. Options included joint venturing with an existing plan in the area, purchasing an insurance plan, building a plan from scratch, or working with a company that assists with the infrastructure and operations.

"We wanted to build to scale quickly, and we understand our limitations as a health system in terms of understanding overall how a health plan is run, so we decided that the best choice was to partner with a company that we're not in competition with from a managed care perspective, and one that had some experience with helping physicians transition from fee-for-service to value-based care," Beermann says.

BayCare has obtained a state insurance license to offer its health plan in four Florida counties, and it has submitted a Medicare Advantage plan application to the Centers for Medicare & Medicaid Services.

Assuming CMS approves the application, BayCare will be actively selling in the MA market by October, Beermann says.

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The marketing plan is based on leveraging BayCare's reputation in the community and its relationship with 450 employed physicians, Beermann says.

"CMS restricts how much you can do with these plans, so there aren't a whole lot of tricks you can do with CMS to set your plan apart from the competition," he says. "They've regulated it very tightly to prohibit either startup plans or mature plans from being able to step on the gas and oversell in any one market. We expect to leverage our brand and the fact that people know us in this community, offering a competitive benefit."

Building a broader network

Optimizing relationships with physicians will be a primary goal, says Ross Armstrong, senior vice president and head of market with Lumeris.

The health system is working with Lumeris to broaden its network of physicians and hospitals outside the BayCare system to ensure sufficient access for future Medicare Advantage plan members.

"We plan for the MA plan to work in a highly collaborative way with the physicians to make it easier for them to manage these patient populations," Armstrong says. 

Gregory A. Freeman is a contributing writer for HealthLeaders.

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