Recent press reports have highlighted growing interest on the part of hospitals and health care systems in developing their own health insurance plans in order to bypass insurance companies and hold onto more of the health premium dollar.

Examples include Piedmont Healthcare in Atlanta and WellStar Health System in Marietta, Georgia, which earlier this year rolled out a jointly owned health plan, and MedStar Health in Washington, D.C., whose insurance was initially offered to its own 19,000 employees.¹

Mount Sinai Health System in New York City—the largest health care provider in the state—will begin offering its own Medicare Advantage plan next year.² The 16-hospital North Shore-LIJ Health System, which serves New York City and Long Island, started laying the groundwork to become an insurer in 2012.³ A survey last year by The Advisory Board Company found that 28 percent of hospitals expect to launch their own health plans within the next five years.¹

The End of Insurance Companies?

The Fiscal Times and The Washington Post have reported that hospitals are plotting “the end of insurance companies” by trying to cut these middlemen out of the equation.^1,2 However, experts say the trend of hospitals developing their own health plans is part of a larger movement toward integrated health care delivery, which includes medical homes, accountable care organizations (ACOs), and shared financial risk between insurers and providers for managing the health care needs of populations as physician and hospital reimbursement models transition from fee-for-service to bundled payments.

Typically, hospital-based health insurance plans are launched by larger multiple-hospital systems with regional coverage, often through partnering with an experienced insurer to create a hospital-branded product. They also require coordination with medical groups, particularly the all-important primary care providers, and better communication among physicians, ideally through compatible electronic health records, said Shantanu Nundy, MD, MBA, managing director of clinical innovation for Evolent Health in Arlington, Virginia. Evolent Health partners with health systems to transform how they deliver care, which may involve building health insurance plans.

“There’s definitely a trend for provider systems to assume more risk for patients’ health,” Dr. Nundy said. “The ways they do that vary along a spectrum, but this trend definitely includes provider systems themselves becoming insurers, putting together health plans, [and] using ACOs or contracting with ACOs to take on risk for population health.”

From Challenge, Opportunity for Emergency Medicine

As shared risk and bundled payment become a larger share of hospital reimbursement, frontline providers, such as emergency physicians and hospitalists, will face increased pressure from their health systems to provide high-quality, highly efficient care because their systems will be financially at risk for the care of the populations they serve, Dr. Nundy said. “But it also means doctors get to do the job we were trained to do—seeing only those patients who require our particular expertise,” he said. “It means putting emergency back in emergency [departments], with patient-centered, efficient, coordinated, quality care.”

There are also opportunities for physicians to play leadership roles in the development of risk-based products and ACOs. Andrew Dunn, MD, FACP, SFHM, chief of the division of hospital medicine at Mount Sinai Hospital in New York City, said he sits on a board of directors for Mount Sinai Care, the Mount Sinai system’s ACO, helping to guide its development of a shared-savings model of coordinated care.

The effects of hospitals entering the insurance business haven’t yet filtered down to the day-to-day work of hospitalists and emergency physicians, Dr. Dunn said, “but I’m sure we will be hearing much more about it. Mount Sinai has taken large steps in the direction of becoming an insurer, and the ACO is the best example of our increased focus on population health. The move for the health system toward becoming an insurer puts providers firmly in the camp where incentives favor quality, value, and efficiency.”

Physicians will still try to do what’s right for individual patients every time without asking whether they have fee-for-service or risk-based coverage, Dr. Dunn added. Physicians want to keep people out of the hospital, and if the systems are set up with incentives correctly aligned, they will try to make better use of discharge planners, social workers, home nursing care, and the like to help prevent avoidable readmissions, he explained.

“The move for the health system toward becoming an insurer puts providers firmly in the camp where incentives favor quality, value, and efficiency.”
—Andrew Dunn, MD, FACP, SFHM

Nick Fitterman, MD, FACP, SFHM, vice chair of hospital medicine for North Shore-LIJ, said his system’s efforts “are still in the early stages and really just an extension of what’s happening with value-based purchasing and at-risk contracts in general. We’re currently involved in six bundled-care initiatives.”

Dr. Fitterman agreed that these efforts haven’t had much impact yet on day-to-day medical practice in the hospital. However, the health system is preparing its physicians to participate in the insurance plan as if it were another bundled-care initiative. “We will be poised to expedite care and facilitate quality and marshal our forces as hospitalists,” he said. “What makes us excited is that the rewards will be much greater for providing good care efficiently.”

The hospital-based health system’s gains in efficiency from mastering risk-based coverage will be reinvested back into the system rather than sharing them with other payers, Dr. Fitterman said. “The vision I hear from our leaders is that they’re looking to get away from hospitals’ current narrow margins and let the system reap the rewards of providing efficient, cost-effective care.”

 References

1. Kliff S. Is this the end of health insurers? The Washington Post. July 5, 2013.
2. Garver R. Hospitals plot the end of insurance companies. The Fiscal Times. March 27, 2014.
3. Rabin RC. Hospitals look to become insurers, as well as providers of care. Kaiser Health News. August 26, 2012.

Larry Beresford is a freelance writer in Oakland, California.