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How Provider-Sponsored Health Plans Can Find Consumer Success

Provider-sponsored health plans that consolidate healthcare operations could generate operational savings and compete with commercial payers.

Provider-sponsored health plans can compete through population health, consolidation

Source: Thinkstock

By Thomas Beaton

- Provider-sponsored health plans (PSHPs) are seen as a way for provider organizations to compete with commercial payers while lowering their own costs and improving care quality, because provider organizations can manage the cost of healthcare services and health plan rates under one umbrella organization.

Launching a provider-sponsored health plan can be a risky proposition. While some provider health plans such as those run by Kaiser Permanente, Geisinger, and HealthPartners have experienced long-standing success, other newly formed provider plans have not managed to achieve financial stability.

Only 4 out of 37 PSHPs formed in 2010 were profitable in the year 2015 and five plans have since gone out of business, said a recent Robert Wood Johnson Foundation assessment. Northwell Health’s CareConnect plan was an even more recent casualty: in August of 2017, the plan shut down due to insufficient revenues and large risk adjustment payments.

Despite the financial and operational challenges of creating a provider-sponsored health plan, successful organizations could reap rewards from consolidating care delivery and the payment for that care under one organizational roof.  

How can provider-sponsored health plans find profitability and potentially compete with larger commercial payers in the modern health insurance market?

Invest in a model of integration and target high-value beneficiary populations

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Carefully planning investments to jump-start provider sponsored health plans, and identifying the most potentially profitable beneficiary segments, may help provider organizations generate positive revenues, analysts from PricewaterhouseCoopers (PwC) said.

The analysts suggest that providers have to determine how much capital investment is needed in order to protect the plan from potential losses during early implementation. Provider health plan investment has to account for operating costs, anticipated initial health plan profit margins, and expected outcome based on a model of healthcare integration.

Provider organizations developing an integrated care model stand to benefit if they operate in densely populated payer markets, secure an expected 25 to 30 percent of market share, and have high potential to financially succeed in consumer-driven healthcare.

Multiple investments are needed to build a successful integrated care model, including governance restructuring and a full health plan management system internal to the provider organization.

Provider-sponsored health plans that want to participate in individual markets can invest in electronic shopping platforms and enrollment technologies that help individuals navigate plan options and streamline the health plan’s enrollment procedures.

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Provider plan executives should also evaluate potential market opportunities by identifying segmented and specialized markets that may have been ignored by larger competitors.

PwC added that PSHPs have to effectively establish their market identity. Analyzing financial and clinical claims data generated within the health system can help identify high-risk patients, utilization trends, and demographic traits of patients.

Provider-sponsored plans can then use the data to see who would benefit most from their plans, and subsequently develop customized messaging to potential health plan consumers.

Create operational capabilities that support effective population health management

Provider-sponsored health plans also need to develop internal operations that facilitate population health management capabilities. Population health management is especially beneficial to PSHPs because population health can be a cost-effective way for organizations inheriting large financial risk to create positive patient outcomes.

A McKinsey report suggested that PSHPs can develop population health management capabilities based on four key areas.

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McKinsey believes that provider health plans need to invest and develop healthcare cost and utilization analytics, chronic disease management programs, governance and strategy alignments, and patient navigation tools for receiving care.

Adding these operational components could allow provider sponsored health plan to determine if certain beneficiary markets, care strategies, and plan offerings are creating better patient outcomes at lower costs for care.

Design benefits based on consumer behaviors and demand

Provider-sponsored health plans should take a page out the benefit design strategy of commercial payers, and develop health plan benefits valuable to modern-day healthcare consumers.

Healthcare consumers have been found to appreciate integrated pharmacy and medical benefits. Integrated benefits helped to lower annual care costs while improving patient outcomes, an Aetna study found.

Combining medical and prescription drug benefits also increased participation in chronic disease management programs, revealing that consumers are actively using these benefits to improve their health conditions.

PSHPs should design health benefits that provide additional value to consumers, in the form of desirable wellness benefits. Wellness benefits such as providing wearable health technology, increased preventive care access, and financial wellness incentives are linked to health plan satisfaction and participation in chronic disease prevention programs.

If provider health plans are having trouble in identifying benefits that value their beneficiaries, they should try to leverage member engagement strategies such as measuring plan engagement activity, using multi-channel communications, and investments in member engagement technologies.

PSHPs that effectively specialize their market offerings, and use tools and strategies that improve consolidated operations, have high potential to compete with established private payers.


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