Should Hospitals Become Health Insurers?

During session 201 of the U.S. News Hospital of Tomorrow forum, three hospital executives discuss the idea of creating their own insurance businesses.

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Hospital systems know change is coming as their payment model transitions from volume to value, and health care systems that don't embrace the changes will not survive.

That was the message by three executives leading expansions into becoming provider-payers, growing their own insurance businesses and taking on that risk. They spoke in a Tuesday morning panel at the Hospital of Tomorrow forum by U.S. News & World Report.

[More Hospital of Tomorrow Forum coverage:]

The American health care system excels at acute care, getting people well when they are sick, but then the patient is discharged into an environment where care is poorly coordinated, said Steven Shapiro, EVP, CMSO at the University of Pittsburg Medical Center. The panelists talked about how to change that system.

For "fast follower" systems waiting to see how the early adopters fare, and what they can learn:

  • Inova Fairfax Hospital, a system in Northern Virginia, partnered with the insurer Aetna. John Moynihan, CMO, said that Inova looked for an insurance partner with a strong reputation and brand, excellence in the insurance business, and scalability. Inova brought to the relationship a strong basis for excellence in care.
  • Sutter Health, a California non-profit health system, started its own HMO business, a defensive move to innovate given the 65 percent market share of the Kaiser system in California, according to Stephen Nolte, CEO of Sutter's new health plan. A movement towards transparency is forcing systems to expose more of the cost of medicine, Nolte said. "Consumers are asking, 'What am I getting for what I'm paying?'"
  • Systems need to adapt to what patients and consumers want. Dr. Steven Shapiro, chief Mmdical and science officer at the University of Pittsburgh Medical Center, said: "Consumers want the Norman Rockwell view of their doctors but they want it on their iPhone."

Advice to executives planning the transition to a provider-payer system:

  • "This is not a dip-your-toe-in-the-water exercise," said Nolte. "You need discipline. Physical relationships need to grow, costs will be exposed, you are taking global risk, operating in different criteria. It takes time to learn to do it, and do it well. It's not a short journey."
  • Shapiro said getting the right infrastructure in terms of people, processes and technology is crucial. He noted that specialists in his system are developing their own pathways and bundles to address the managed care model and need to streamline costs.

Asked what their biggest mistake was in creating their insurance model, two panelists said they came late to the game.

"We made a decision to not participate in Covered California (California's health insurance exchange" largely because we weren't ready," said Nolte. "In spite of the enrollment statistics coming out of Covered California, I like having a seat at the table rather than not."

All three panelists agreed with moderator George Lynn that hospital systems that don't believe the movement from volume to value-based care will stick, "will be in serious jeopardy."

"This is a time to innovate," Nolte said. "This comes from groups learning together, seeing what worked, what didn't work. I have conversations with people every week in that 'fast follower' mode... . We have an opportunity to change the way healthcare is delivered in this country."

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