Becker's Hospital Review

Finance, Revenue Cycle & ICD-10 33 FEature Some hospitals and health systems hopped on the health insurance/HMO bandwagon right away and decided to try their own hand at starting a health plan. Geisinger, Intermountain Healthcare in Salt Lake City, Henry Ford Health System in Detroit, Kaiser Permanente in Oakland, Calif., and University of Pittsburgh Medical Center are some of the most notable systems with longstanding, successful health plans. Providers Becoming Payors Should Hospitals Start Their Own Health Plans? By Bob Herman I n the 1980s, Henry Hood, MD, decided it was time for his health system to make a change. we really need to learn how to do this,'" Dr. Davis recalls. "If you look back on it now, it was pretty visionary. That's kind of how it started for us." The late Dr. Hood was a neurosurgeon and CEO of Danville, Pa.-based Geisinger Health System, then known as Geisinger Medical Center. During the 1980s, the United States began to unfurl its first wave of managed care — that is, coordinating patient care within a specific network in an attempt to improve quality and decrease costs. Dr. Hood wanted to be part of the growing demonstration, which resulted in the formation of the Geisinger Health Plan. A handful of health systems like Geisinger have successfully played the role of both provider and payor for the past 30-plus years, and it is one of the reasons President Barack Obama has heralded Geisinger as an exemplary system of healthcare delivery. As healthcare reform continues to evolve, more hospitals and health systems are exploring the option of starting their own health plans and insurance divisions. But managing care as both provider and payor is no easy task — and taking the wrong steps could be detrimental to an organization. Duane Davis, MD, a board-certified internist and rheumatologist who now heads the Geisinger Health Plan, says the health insurance arm was the beginning of Geisinger's own reform. "Dr. Hood basically said to all of us, 'Managed care is the beginning, and the financing of care is changing. Healthcare delivery will change, and Déjà vu from earlier decades? In the 1990s, managed care, which included HMOs, PPOs and other insurance vehicles, began to proliferate throughout the healthcare system. Managed care, for better or for worse, became synonymous with U.S. healthcare. However, not all hospital-based health plans lasted, as many could not back up the financial risks associated with health insurance. As the 2000s evolved, several hospitals began to divest their health insurance arms like they did with their physician practices. Now, under President Obama's Patient Protection and Affordable Care Act, there is a renewed emphasis on managing the continuum of care with better quality and decreased costs. In some instances, such as accountable care organizations and bundled payments, hospitals will be viewed as provider, insurer and care manager. "Through payment changes, the [PPACA] is creating incentives for provider systems to manage the entire process of care," says Peter Weiss, MD, president of Concert Health Plan, which started offering commercial group health insurance through the Florida Division of Adventist Health System in 2010. "This is easier when the provider system is also the insurer and can align the incentives of all parties around the health of the member." Lisa Goldstein, an associate managing director at Moody's Investors Service, agrees, saying healthcare reform has inspired a renaissance of hospitals wanting to dip their toes back into the health insurer realm in order to comply with the goals of federal healthcare reform. "Historically, we've seen this trend before," she says. "[Healthcare] is a very cyclical industry. In the mid-1990s, many health systems became vertically integrated. The hospital was the core business, but management also decided to go into the insurance business like we're seeing today." However, in the 1990s, the practice of hospitals doubling as insurers was more experimental than anything else, especially as the healthcare system tried to grapple with the concept of managing and financing the care of select groups of people. Now, Ms. Goldstein says hospitals want to start their own health plans because healthcare reform demands population health management — and what better way to manage the care of a population than by becoming that population's financing vehicle?

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