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4 Motives Why Hospitals Adopt Provider-Sponsored Health Plans

Provider-sponsored health plans are gaining ground due to the new transformations within the healthcare industry such as the adoption of alternative payment models.

By Vera Gruessner

Due to the many new transformations taking place within the healthcare industry today such as the transition from fee-for-service reimbursement to value-based care payments, the potential for creating provider-sponsored health plans has grown tremendously.

Provider-Sponsored Health Plans

With population health management, bundled payments, and other new healthcare reforms hitting the market, provider-sponsored health plans are becoming a more popular option among hospital networks, according to The National Law Review. Initially, provider-sponsored health plans were more common in the 1980s and 1990s but have lost their presence in more recent years. However, these health plans may be seeing a comeback in the near future.

With the health insurance industry moving away from the fee-for-service payment model, more providers are looking to get the full benefit of premium costs when it comes to managing their revenue cycle. As more providers take on transforming healthcare delivery and improving care coordination, it only makes sense to take the next step and adopt provider-sponsored health plans.

Gary Scott Davis, Partner in the law firm of McDermott Will & Emery LLP, explained in The National Law Review the transition providers have taken to adopt these health plans in a provider-payer integration graphic.

Care coordination and population health gain ground

Davis went on to clarify the reasons why  provider-sponsored health plans should be more successful in today's market. These reasons include greater alignment between hospitals and physician groups as well as a general focus on care coordination throughout the healthcare continuum. Additionally, there is much more focused on population health management and performance risk across physician groups and hospitals today.

Value-based care boosts provider focus on revenue

There is a much bigger movement toward value-based care reimbursement, stronger physician leadership, and patient satisfaction - all of which position providers to transition toward hospital-sponsored health plans.

Alternative payment models and the focus on the Triple Aim has all led providers to become more knowledgeable and capable of managing health plans and in-house reimbursement systems.

Rising healthcare costs fall on providers to fix

Navigant Healthcare, a consultancy, also reported on some of the reasons why physician groups and hospitals are better positioned today to adopt provider-sponsored health plans. First, rising healthcare costs and the inability to keep medical costs from growing faster than the GDP is a major problem facing this country and it seems that providers are left to play the biggest role in reducing these costs, which is why in-house health plans may be a way forward for many providers.

“The snowballing cost spiral is the compounded effect of medical inflation, healthcare workforce wage increases, increased utilization, overtreatment, unhealthy lifestyles and a system of care in the U.S. where each sector blames the other for inefficiency and suboptimal results,” stated the report from Navigant Healthcare. “The buck stops with providers. The cost problem in healthcare is not the fault of providers completely but is largely their problem to solve. Changing how providers do their work is the key to cost containment.”

Payer-provider relationship is diversifying

Another major reason why providers are bringing more focus on in-house healthcare coverage options is due to the changing relationship they’ve faced in recent years with their partnering payers. Since fee-for-service payments are falling by the wayside, providers are struggling to work with payers in implementing alternative payment models.

Managing multiple health plans and contracting with various payers can cost an individual physician practice an average of $83,000 per year, which adds significant costs to the entirety of the healthcare industry’s spending. All of these reasons are why more providers are looking to invest in provider-sponsored health plans.


Dig Deeper:

Key Strategies for Transitioning to Value-Based Care Payments

Accountable Care Organizations Rely on Population Health Data



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