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Advancing value-based care within health care strategy

Provider-sponsored health plans

Market forces, the uptake of value-based care throughout the industry, and payer encroachment on traditional provider activities are placing additional stress on providers’ financial performance. Can a move into health insurance help alleviate these pressures?

Increasing provider interest in health insurance: Why now?

The first part of our four-part blog series on value-based care payment models discussed the motivating factors for providers to take on increased risk, including consumer expectations, cost pressures, regulations, and COVID-19. Providers, driven by these pressures, are shifting from traditional fee-for-service payment models to value-based ones, with those most committed attempting to shift upward of 40% of their revenue to be managed under value-based contracts. This is fueling increased alignment between payer and provider incentives, and encouraging providers to build capabilities, traditionally held by payers, to enable success in such contracts.

As providers continue to build capabilities for success in value-based care and invest significant dollars, they are realizing that value-based contracts, and even partnerships with payers, may not maximize their capture of the premium dollar. Furthermore, payers are actively building or acquiring care delivery assets and capabilities such as primary care, home health, and pharmacy services.

Although, provider-sponsored plans (PSPs) are not a novel concept, with many PSPs existing and successful for decades, the industry’s acceleration toward value-based care is pushing more health systems to explore the development of their own health insurance business or further integrate existing plan assets.

Benefits of having a provider-sponsored plan

As providers and the industry head toward taking on additional financial risk, providers can anticipate several benefits from entering the plan space including:

  • A more sustainable and predictable revenue flow
  • The ability to fully capitalize on current population health capabilities
  • Leveraging a potential plan as a growth tool to enter new markets and grow attributed lives within current markets
  • The ability to maintain greater control over their network, patient experience, quality of care, and care model

Expanding into the provider-sponsored plan space

Providers have a multitude of options to expand into the provider-sponsored plan space, with varying degrees of integration seen between payer and provider functions of organizations with plans currently. These varying degrees of integration have all demonstrated success, leading to multiple case studies of successful provider-sponsored plans.

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Regardless of the integration model, successful provider-sponsored plans tend to have a 50-50 revenue split, or greater, of plan-to-provider revenue. This represents a tremendous long-term growth opportunity for providers that have stagnated growth due to physical and geographical limitations.

Successful plans identified by Deloitte have 500,000 to 12 million insurance lives. However, this growth did not occur overnight; most of these plans have been established for more than 30 years. Opportunities for providers to enter this space often occur in areas where they already share financial risk: their own employee base, Medicare/Medicare Advantage, and Medicaid.

Achieving 100,000 enrollees in one line of business typically achieves economies of scale in health plan capabilities, crossing a key threshold to be competitive with regional and national carriers in the markets the provider serves.

Key questions to ask before launching your own provider-sponsored plan

It is critical that providers enter the health insurance market with a targeted approach to reduce and manage financial volatility. The following are a few key questions providers can ask prior to launching their own provider-sponsored plan:

  1. What insured populations does our provider system currently manage well, from both a care delivery and financial lens? What lines of business would our system like to target from a health plan lens, and why? What geographies can we serve with influence on care model, provider network, and incentive structures?
  2. Does our organization have an existing network strategy? How do we assess the performance of our network? How will future partners fit in with the line of business/geographical strategy for our health plan vision?
  3. How does a health plan strategy align with and assist in achieving enterprise goals?

Download the blog to learn more.

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