Becker's Hospital Review

Register Today! Becker's Hospital Review CEO Strategy Roundtable - Nov. 5, 2014 - Chicago 38 T raditionally, healthcare delivery and health insurance existed as two separate types of business, but there is a new trend in the healthcare industry of hospitals and health systems buying insurance companies. Here are five things to know about healthcare or- ganizations merging with insurance providers. 1. Many healthcare organizations are seeking to become both the payer and provider to offer better care and cut costs. Health reform is increasingly fo- cused on population health management, and many healthcare organizations are trying to improve qual- ity of care through the use of value-based systems that employ quality measures. Hospitals that enter the insurance business may be able to better design quality care programs by becoming a unified orga- nization and removing competing incentives. 2. Becoming the provider and payer can also cut costs for healthcare organizations. As part of the transition to pay-for-performance, the healthcare industry has become more focused on preventive care with the goal of keeping patients healthy. Pro- viding more preventive care to patients can lead to dramatic costs savings, and by merging with health insurance companies, healthcare organizations can change the way they are reimbursed to make pro- viding more preventive care a doable feat. 3. Choosing to act as both payer and provider, in 2012, Detroit Medical Center announced it had purchased ProCare Health Plan, a Detroit-based Medicaid HMO. More recently, in April, a subsid- iary of Englewood, Colo.-based Catholic Health Initiatives reached an agreement to acquire Qual- Choice Holdings, a health insurer based in Little Rock, Ark., pending regulatory approval. In May, St. Louis-based Acension Health — the nation's largest nonprofit and Catholic healthcare system — announced it is considering buying an undis- closed insurance company. 4. The trend of health systems and health insurers merging has caught the eye of antitrust regula- tors because the mergers can lead to a reduction in competition by limiting entry or expansion of third parties into the market. By putting com- peting organizations at a disadvantage or even driving out competition all together, the unified organizations would be able to raise members' premiums. Although it would be costly to gather and analyze data concerning hospital-offered health insurance plans, antitrust regulators and health economists believe the research is nec- essary to address the effects of these plans on healthcare quality and costs. 5. The one major study directly related to hospital- insurer integration with quality and premiums was published in 2013 in the journal Health Services Re- search. The study shows the integration may be bad for consumers because when hospitals buy health insurers, the plans offered have higher premiums. The study also found 70 percent of the additional premium cost is not attributable to higher quality care. Even though consumers rate hospital-offered insurance plans as higher-quality than other plans, researchers have been unable to find any evidence showing a correlation between the higher premi- ums charged and superior quality of care. n A s a result of the Patient Protection and Affordable Care Act, more than 8 million people have signed up for health plans through the new exchanges. The reform law has also had a significant impact on Medicaid enrollment. Here are five things to know about Medicaid enrollment in the wake of the PPACA's implementation and what the growing Medicaid population means for healthcare providers. 1. The PPACA originally required states to expand their Medicaid programs to cover those earning as much as 138 percent of the federal poverty level. However, the 2012 Supreme Court ruling on the healthcare reform law made Medicaid expansion optional. As of March 26, 26 states and the District of the Columbia had chosen to implement expansion in 2014, according to the Kaiser Family Foundation. Five states were still openly debating the issue, while 19 states had decided not to move forward with expansion. 2. Medicaid enrollment has been on the rise since the PPACA's major provi- sions took effect. In June, HHS reported approximately 65 million people were enrolled in Medicaid and the Children's Health Insurance Program in April, and more than 1.1 million people enrolled between March and April. Comparing April data to enrollment numbers from July to September of 2013 (before the PPACA exchanges opened), more than 6 million additional people had signed up for Medicaid and CHIP, a 10.3 percent increase com- pared with the average monthly enrollment for July through September. 3. States that have expanded their Medicaid programs aren't the only ones seeing enrollment growth. According to an analysis from healthcare business advisory company Avalere Health, in the first quarter of this year, at least 17 states that didn't expand their programs still saw an increase in people sign- ing up due to the "woodwork effect" — when people who were previously eligible but not enrolled later sign up because of increased outreach and awareness. For instance, Montana saw a 10.1 percent increase in enrollment during the first three months of 2014. Still, enrollment growth has been no- tably faster in expansion states. According to HHS, states that had Medicaid expansions in effect in April saw Medicaid and CHIP enrollment increase by 15.3 percent, compared with 3.3 percent overall in non-expansion states. 4. The federal government will pay 100 percent of the costs for newly eli- gible Medicaid beneficiaries under expansion through 2016 and then scale back funding gradually to 90 percent in the following years. However, the increased enrollment under the PPACA could still place a financial strain on the states because of people who were previously eligible but not enrolled signing up due to the woodwork effect. The federal government pays about 60 percent of the costs on average nationally for the "woodwork" enrollees, meaning states must foot a considerable share of the bill. In California, for instance, Democratic Gov. Jerry Brown recently released a budget contain- ing an additional $1.2 billion in spending for Medi-Cal, the state's Medicaid program. 5. However, Medicaid expansion is a financially positive development for hospitals. According to an analysis conducted by the Colorado Hospital As- sociation of reported financial and volume data from 465 hospitals in 30 dif- ferent states, self-pay charges in expansion states dropped from 4.7 percent of all charges in the first quarter of 2013 to 3.1 percent during the first three months of this year. Additionally, the average amount of charity care pro- vided per hospital in the expansion states also declined by about 32 percent, from $2.8 million in the first quarter of 2013 to $1.9 million during the first quarter of this year. n 5 Things to Know About the Merger of Health Systems and Insurance Providers By Ayla Ellison How is Medicaid Expansion Affecting Healthcare Providers So Far? By Helen Adamopoulos

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