Provider-Owned Health Plans: Strategic Questions For Leaders
Provider-sponsored health plans continue to make news. Some health systems have exited this market, selling their health plans to larger more established companies, or shutting down products all together. Others have drastically pared back aspirations for their health plan. Still other systems are leaning into this strategy, expanding health plan operations within their current markets or looking for acquisitions and other sources of membership growth to achieve scale and greater impact. These plans see a future where payment and care are more closely aligned and create differentiation compared to standalone providers or payers.
The different approaches are part of a debate that has been going on for decades. Can provider-sponsored plans bridge gaps between payers and providers, build a better experience for members-patients, and solve entrenched cost and quality issues? Or are they destined to struggle against large scale, better equipped players who command more advantageous market terms?
While the debate tends to center on the presence of and investment in the health plan, the determining success factor is actually the health system, which brings us to the heart of the matter — idealizing the plan itself instead of concentrating on the end goal of improved patient outcomes.
It’s not about the plan, it’s about the underlying clinical product
Having a health plan should not be the center of the strategy. Rather, the health plan is a vehicle or channel to commercialize the system’s strategy. Successful provider-sponsored health plans have drawn clear connections to their care delivery strategy. This starts with rendering a better and more seamless care experience on a narrow network platform with the health system at the center. It is most durable and accretive where care delivery strategies and improved clinical models produce a lower overall total cost of care, a differentiated experience for the member, and a more sustainable rate of medical inflation. Broadly speaking, we see three categories of health system priorities yielding distinct provider-sponsored plan archetypes — growth in commercial line of business, success in value-based care, and serving the neediest populations. Each call for different focus and scope of capabilities across the integrated enterprise.
Failing to align the provider-sponsored plan with system strategies and redesign care, finance, and experience approaches will almost always put the plan at a disadvantage against traditional insurers who are entrenched, have strong brands, sustain well-forged distribution networks, and are facile with the ins and outs of operating and competing in what is a complicated health insurance business.
Key considerations for health system leaders
Provider-sponsored plans will continue to be a factor in the market. Almost certainly, the progress that these plans make will be uneven across the US. There are already markets where provider-sponsored plans have gained substantial market share and play a large role across commercial, Medicare, and Medicaid product lines. There are also markets where the legacy payer-provider roles may remain unchanged for years to come.
In our work across markets, we are seeing providers leaning into this concept of building a differentiated clinical product and then using a health insurance offering to commercialize that. This often works its way inside out – these systems are developing the clinical proof points, often via risk-based contracts, before moving aggressively into growing their health insurance offerings.
Is this a recipe for guaranteed success? No, because the competitive landscape in the health insurance space is a very difficult one. However, it is an effective and proven course in our view, as it seeks to connect real value in care delivery to a better and more sustainable health insurance product.
