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'Shoulder-to-Shoulder': Why This Payer-Provider Partnership Spurned Vertical Integration

By Steven Porter  
   July 31, 2019

A major insurer, once the largest in Minnesota, is 'co-creating' a provider group with a health system, while they hasten healthcare's reinvention.

Blue Cross Blue Shield of Minnesota President and CEO Craig E. Samitt, MD, MBA, doesn't think vertical integration will solve the healthcare industry's problems.

Samitt's take is an interesting one, especially for someone who spent seven years at the helm of the vertically integrated Dean Health System. It's an interesting take also for someone who's currently the top executive of a payer organization that's making a major investment in a provider.

BCBS of Minnesota announced a strategic investment last month in 20 primary care and specialty clinics. But the transaction isn't a merger or acquisition. The health system's investment is buying just a minority stake in the clinics, which will continue to be majority-owned by North Memorial Health, a two-hospital system based in Minneapolis–St. Paul, Minnesota.

The health plan isn't getting into the hospital business, and the health system isn't getting into the insurance business, Samitt tells HealthLeaders. Instead, the two organizations are working together to establish a joint venture with its own leadership and the freedom to innovate as it sees fit, to align its entire strategy around the consumer, he says.

"We as partners are co-creating what we believe the future of care delivery will look like, should look like, can look like, not what it's just historically been," Samitt says.

One major metric by which the health plan and health system will track the success of their venture is the cost of care, which they aim to reduce by up to 20% over five years through value-based care principles.

The move comes as insurers look for ways to more directly influence the care their beneficiaries receive. That has prompted some to take a hands-on approach to clinics and physician groups. Blue Cross and Blue Shield of Texas, for example, announced a partnership last spring to open 10 advanced primary care clinics in Dallas and Houston in collaboration with Sanitas USA, which already had clinics with Blues plans in Florida and New Jersey.

The trend toward vertical integration among health plans and providers follows the success of UnitedHealth Group's Optum, which has been modeled by other major insurers. It comes also as CVS Health awaits a judge's final approval for its Aetna acquisition.

But, again, this joint venture in Minnesota isn't a merger or acquisition.

'Vertical Integration Isn't the Way'

The main reason why BCBS of Minnesota isn't pursuing a full-scale acquisition of North Memorial's clinics, Samitt says, is because the relationship between payers and providers should be collaborative.

"We see a lot of vertical integration: hospitals employing physicians, health plans buying medical groups, pharmacy companies buying health plans," he says. "But the reality is that, at least in my experience, acquisitions don't necessarily lead to—and frankly often have not led to—what we want to see, which is enhanced outcomes, greater affordability, better service."

Samitt says his views on this topic were shaped largely by his experience at Dean Health System, which SSM Health acquired in 2013. As a result, he hasn't been an advocate for vertical integration, even as a wave of consolidation has rippled across the U.S. healthcare landscape in recent years.

"Our industry has always approached improvement with the philosophy that bigger is better. And the reality is bigger is often not better. Better is better," he says. "Our industry can't continue to seek to solve its problems by merging, acquiring, or controlling another sector of the industry."

Report: Navigating the M&A Landscape: Achieving Clinical and Financial Objectives

Instead, industry leaders should focus their energy on reinvention and improving quality, service, and affordability—tasks done best with a "shoulder-to-shoulder" approach, he says.

"Vertical integration isn't the way, partnership is the way," he adds.

Noting that he leads a nonprofit organization, Samitt says the collaboration between BCBS of Minnesota and North Memorial is about mission over margin.

"Our goal is to be a better system and to have a better organization," he says. "If we become bigger as a side effect, that is great. But that is not our primary intent."

'An Ounce of Prevention'

Samitt says he's worried about the trajectory of U.S. healthcare. If incumbent organizations don't reinvent themselves, he says, then the likes of Amazon, Google, Walmart, and Target will "reinvent it from the outside."

The cause is especially pressing, he says, as healthcare costs continue to rise at an unsustainable rate. Rather than fighting with each other, the industry's experts should focus on aligning their interests around ways that improve health outcomes and lower cost.

"We use the expression that 'an ounce of prevention is worth a pound of cure.' But that's not how our industry works," Samitt says. "For me, primary care is in the ounce."

The healthcare industry hasn't invested effectively in primary care and other types of "upstream care," which includes wellness and prevention strategies, social determinants of health, and other factors that can mitigate a population's need for higher-acuity care, Samitt says.

That's the idea behind the health plans investment in primary care.

"The reality is that if we address all the upstream drivers of health, even the demand for traditional primary care services diminishes because we're just a generally healthier community," he says, "and I think the future will be very much about investing much more deeply in upstream care and services."

BCBS of Minnesota and North Memorial said their shared ownership of the clinics will begin in January, but they hinted also that there may be more to come, describing the venture as "just the beginning of their relationship" and "an important first step in revolutionizing" care delivery in Minnesota.

“Our industry can't continue to seek to solve its problems by merging, acquiring, or controlling another sector of the industry.”

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


The insurer will take a 49% stake in 20 primary care and specialty clinics in the Twin Cities.

More vertical integration isn't the sort of payer-provider alignment the market needs, says the insurer's CEO.

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