Long adversaries, hospitals and health plans increasingly have to collaborate and think like one another to stay competitive in today’s environment.
These relationships are taking on all sorts of forms, whether bundling payments for an episode of care into one to encourage coordination, or combining hospital and payer data to find insights on how to improve care. Other hospitals and systems, meanwhile, are purchasing or starting their own health plans, looking to master both sides of the equation.
An Advisory Board Company survey last year found that about 34 percent of hospitals and health systems own a health plan, up from 18 percent in 2011. Plus, another 21 percent of survey respondents said they planned to launch a health plan by 2018. One of the latest examples of this trend is eastern Wisconsin-based Froedtert Health, which recently announced that it’s pursuing a deal to take on partial ownership of Network Health, an insurer already owned by another network, Ministry Health Care.
Catherine Jacobson, president and CEO of Froedtert, says that taking an ownership role of the health plan allows its affiliated academic medical center, two community hospitals and medical group to be added to a larger provider network in northeastern Wisconsin. That will pull in patients from an expanded geography that they couldn’t tap into before.
Jacobson doesn't think that every hospital needs to own a health plan to stay relevant — and in some markets, it probably wouldn’t work. In Wisconsin however, there’s a wealth of other provider-owned plans, and for Froedtert, grabbing a stake in a one will help the organization more smoothly progress to value-based care.
“As health systems are shifting from volume to value, you’ve got to find a way to be able to share in that transition,” she says. “Because, if you stay in a classic fee-for-service reimbursement model and you’re working on reducing the costs of health care, you’re working on reducing your own revenues. And if you can’t participate in at least some of that coming back to you to reinvest in the delivery system, you can’t sustain these changes.”
Ministry Health Care and Jacobson's Froedtert are already familiar with one another, having collaborated through the Integrated Health Network of Wisconsin, a clinically connected consortium of six provider organizations. All told, those comprise 34 hospitals, 450 clinics and 4,500 physicians all remaining independent but working together to transform through an accountable care organization. Ministry, part of nonprofit giant Ascension Health, had first acquired sole ownership of the 130,000-member health plan in 2012.
Froedtert toyed with the idea of starting up its own plan, Jacobson says. But because of the high ownership and startup costs, the health system decided to partner in a co-ownership arrangement with 15-hospital Ministry, and its payer expertise last year.
Jacobson, who’s also the chair of IHN, says they’re still in the early stages of working out the co-ownership arrangement, including clearing regulatory hurdles. It’s possible, down the line, they may offer a health plan on the insurance exchanges, and seek other health system partners to join the partnership. But first, they’re focusing on making sure that the two sides work together closely in the transition.
“That’s what we still have left in front of us is making sure that integration is successful,” she says. “I think, just like any partnership, joint venture, merger, acquisition, you can make the deal, but then you’ve go to make it work. And so, the integration part of this is going to spell the success or failure at the end of the day.”