Hospital Systems Branch Out as Insurers

NCPA January 2, 2013

A growing number of hospital systems are moving to start their own insurance plans, aiming to broaden their roles and prepare for the changes coming under the federal health care overhaul, says the Wall Street Journal.

Piedmont Healthcare and WellStar Health System, both in the Atlanta area, are set to announce a jointly owned insurance arm, with the goal of marketing coverage to employers and Medicare recipients in 2014. They also will consider selling coverage on a health exchange, one of the online insurance marketplaces required in each state by the health-overhaul law. In recent months, northern California's Sutter Health and New York's North Shore-Long Island Jewish Health System have said they would start selling health plans.

• A 2011 survey of 100 hospital leaders by health research firm Advisory Board Co. found that 20 percent of them intended to market an insurance plan.
• In 2010, around 10 percent of community hospitals owned, or were part of systems that owned, health plans, according to the American Hospital Association.

Typically, the new entrants will offer health maintenance organization-style plans that allow patients limited access to doctors and hospitals outside their network.

The moves reflect a broader blurring of the lines between those who provide health care and those who pay for it, as both sides increasingly aim to provide more efficient, seamless care. The hospital systems themselves are the product of a consolidation that brought together many hospitals and doctors. Driving the trend is the mounting pressure to reduce costs, as well as the changes set to be unleashed by the health care overhaul.

The hospitals expect to get a shrinking slice of reimbursements from the fees insurers and others pay for specific services. That payment system has been blamed for fueling rising health costs.

Most hospital systems have been stopping short of getting an insurance license, often taking more limited steps like striking reimbursement deals with insurers that reward them for providing more efficient care. Some are also forging partnerships with insurers that sometimes involve jointly selling a health plan built around the system.

Source: Anna Wilde Mathews, "Hospital Systems Branch Out as Insurers," Wall Street Journal, December 16, 2012.