More hospitals and health systems are getting into the health insurance business but with experienced health plans as their business partners.
June 11—The year of the crossover healthcare deal shows no signs of slowing down with the release of new figures that point to a record number of new health plan-provider sponsored insurance products in 2018.
Oliver Wyman Health, the healthcare division of the New York-based consulting firm Oliver Wyman, released a report in May that found health insurers partnered with providers to launch 22 insurance products during the first quarter of 2018. That puts insurer-provider partnerships on pace to bring a record 88 health plans to market this year. The previous record annual total was 51 in 2015, according to Oliver Wyman Health, which has been tracking such deals since 2013. The company recorded 28 deals in 2017.
The firm bases its figures on a review of press releases from the 50 largest U.S. health insurers.
Tom Mikuckis, partner in Oliver Wyman’s Health & Life Sciences Practice, attributed the projected jump in insurer-provider plan partnerships this year to three factors:
- Needing to move beyond payment model transformation
- Increasing pressure from innovators and disruptors
- Growing employers and customer expectations
“For traditional payers and providers, partnering to deliver a better experience and more affordable products is a major pathway to combat this threat and to drive innovation,” Mikuckis said.
Of the 22 insurance products unveiled so far this year, 73 percent are co-branded or joint ventured health plans, according to the report. That’s more than double the 33 percent of the 51 health plans that insurer and provider business partners co-branded or joint-ventured in 2015.
“The JV structure allows the entity to set up a leadership and governance structure that’s focused on delivering maximum value to the market and balances the interests of both owners,” Mikuckis said. “It can also encourage and enable a degree of risk-taking and innovation that may not be in the DNA of either legacy organization.”
What’s the Pitch?
Another significant change is the number of co-sponsored insurance products that explicitly mention value-based compensation as the way they will pay participating providers for the care they give to members. This year, 20 of 22 health plans, or 91 percent, touted value-based compensation. That’s a jump from 51 percent in 2015, when 26 of 51 health plans did so, according to the report.
One reason co-sponsors may be more willing to stress the value-based compensation component of their health plans is that their pay-for-performance methodologies appear to be working to hold down costs and improve quality of care. Better care for less money is music to the ears of employers and others targeted to purchase the plans.
Earlier this month, for example, ACO Partner announced that 148 physicians who cared for more than 27,000 patients with commercial coverage through Blue Cross Blue Shield of Arizona shared a total of $148,000 in bonuses by meeting specific cost and quality targets in 2016.
ACO Partner is a joint venture between Blue Cross Blue Shield of Arizona (BCBSAZ) and Change Healthcare, the Nashville-based analytics and care-coordination firm. ACO Partner works with insurers and providers to create value-based care delivery models. It created the BCBSAZ Shared Saving Program, through which the participating physicians treated patients and recieved their bonuses.
Commercial Value-Based Results
In May, UnitedHealthcare announced the latest results from its two-year-old Spine and Joint Solution program. The bundled-payment arrangement pays providers a fixed fee for a single episode of care, like knee or hip replacement surgery. The fee covers all services from all providers from pre-surgery through rehabilitation. Forty-six different healthcare facilities participate in the program.
To date, according to UnitedHealthcare, the program has reduced hospital readmissions for patients who underwent joint replacement surgeries by 22 percent and reduced the complication rate for the same patients by 17 percent. That’s in addition to reducing the average cost of a joint replacement procedure to $26,500 from a $40,300 average price tag nationally, the company said.
And in April, the Blue Cross Blue Shield Association released the latest results from its 3-year-old Total Care program. Total Care is the amalgam of all the different value-based care models operated by the association’s 36-member Blue Cross and Blue Shield plans. The value-based care models include accountable care organizations (ACOs), patient-centered medical homes (PCMHs), pay-for-performance plans, and bundled-payment arrangements.
Over the first three years of the program, according to the association, the more than 19 million patients covered by Total Care value-based care models:
- Had 10 percent fewer hospital emergency department visits
- Had 7 percent more HbA1c tests for controlling their diabetes
- Were 5 percent more adherent to their heart medications
- Had their hospitalization rate drop by 15 percent each year
- Incurred 35 percent less in healthcare costs than non-Total Care Blues plan members
“BCBS companies’ local value-based care programs collectively build strong partnerships with doctors, nurses, and hospitals that result in measurable healthcare improvements that help our members receive the right care in the right setting at the right time, while making health care more affordable,” said a release.
Experimenting with different models
Given that success, health insurer and provider plan sponsors don’t appear to be content to offer just one type of value-based care model. A survey of 240 ACOs by the National Association of ACOs (NAACOS) and Leavitt Partners, the Salt Lake City-based healthcare consulting firm, revealed a willingness by plan sponsors to experiment with other models that base payments on outcomes. NAACOS and Leavitt published the results of their survey in October 2017 in Health Affairs.
For example, 86 percent of the ACOs said they operate or plan to operate PCMHs. Forty-seven percent participate or plan to participate in Medicare’s Bundled Payment for Care Improvement program. And 42 percent said they’re in or intend to join Medicare’s Comprehensive Primary Care Plus program.
Further, a new survey of 90 health system executives by Lumeris, a St. Louis-based managed-care service company, found that 27 percent intend to launch their own Medicare Advantage plans within the next four years.
All of this vertical integration activity by insurers and providers is starting to be reflected in the historical trend figures kept by the American Hospital Association (AHA). According to the latest available data from the AHA, in 2016:
- 16 percent of hospitals owned or co-owned a PPO product, up from 12 percent in 2012
- 16 percent of hospitals owned or co-owned an HMO product, up from 13 percent in 2012
- 6 percent of hospitals owned or co-owned an indemnity or fee-for-service insurance product, up from 4 percent in 2012
If Oliver Wyman’s forecast is correct, those percentages kept by the AHA should rise even higher.
David Burda is a veteran healthcare business reporter. Follow him on Twitter: @DavidRBurda