ACHE 2017: Creating a provider-sponsored health plan means understanding your market

The lines are blurring between healthcare providers and payors as more providers are sponsoring their own health plans or partnering with payors. Unfortunately for interested providers, that greater prevalence hasn’t come with any one-size-fits-all approach for making these plans succeed.

As of 2014, 108 plans cover around 18 million members in 39 states, according to Navigant consultants Eric Meinkow and Christopher Kalkhof.

In their presentation at the American College of Healthcare Executives (ACHE) Congress in Chicago, they said the growth in provider-sponsored health plan trend has been driven by two factors—one being greater risk being foisted upon health systems through alternative payment models, like accountable care organizations and bundled payments, and the second being consolidation among both health systems and insurers.

Meinkow said successful provider-sponsored plans have generally been part of fully integrated systems, specifically mentioning Kaiser Permanente and Intermountain Healthcare, allowing for a “shared vision” along with data sharing.

“When I look at some of the ones that are not successful,” Meinkow said, “they don’t have a (primary care) network in place, they don’t use the health plan as a (third-party administrator) for themselves. It’s all very fragmented. The pieces may as well not even exist together.”

The first step to create a provider-sponsored health plan, the pair of consultants emphasized, is a period of self-reflection. Leaders need to have clear answers as to why their organizations should assume more risk, the resources they need to do so, and most importantly, what level of risk is appropriate for their market.

Then come considerations like whether a provider can build a new plan or will need to have a contractual or joint venture partnership with an existing payor. Selecting the optimal partner comes with plenty of extra questions—like how to allocate risk or what kind of governance model will work—and some providers’ initial business instincts may steer them wrong in this area.

“The largest payor in your market may not be the best partner,” Kalkhof said. “They may have really bad behavior and they have no intention of being friends or colleagues or collaborators with you whatsoever. It may be one of the smallest payors in town who is more amenable to having a partnership because they want to grow.”

Kalkhof specifically warned against trusting payor data, mentioning an instance where a potential partner left out data from eight hospitals in a system in its cost analysis.

With their experience working for both providers and payors, the consultants there are some common elements of a successful provider-sponsored health plan:

• Mitigating deficiencies in capital, product composition, competition and controlling costs.
• Attracting an appropriate level of enrollment (which Kalkhof pegged at “around 400,000 lives”).
• Anticipating the reaction from competitors.
• Having a long-term strategy on timing new products and expansion, while knowing if the IT and operational infrastructure is scalable to handle the larger volume.

In the end, however, there’s no one right way to create a successful provider-sponsored health plan.

“There’s no right formula that we can apply across the board,” Meinkow said. “If it works for one, it works for one. You need to do the due diligence on your own, understanding what product you want to get into, understanding who you want to partner with, understanding the market share and volume you need to be successful.”