Why providers should sponsor health plans again

In the 1980s and 1990s it was all about integrated healthcare networks and profit taking. But it didn’t work out. Perhaps the theory was correct, but there was far too much front end cost and not enough population health management skill to help the plans turn a sustainable profit. Most provider plans ran out of time and money.

Now we can see the end of fee-for-service and the advent of capitation. This time health plans are for provider survival. It’s time for providers to move from taking profit from utilization to managing behavior. That means it’s time for population health management based on big data.

It’s time for the buyers of healthcare and users of healthcare to work together to take personal responsibility for health. This means moving away from punitive motivation to find benefits and rewards that manage healthy behavior.

With provider sponsored health plans it’s time for providers to move into the retail space. Because when providers sponsor their own health plans their delivery systems become commodities, cost centers not profit centers. When the health plan drives the financial bottom-line retail activity is based on capturing any external cost to the health plan. The health plan is incentivized to eliminate as much of the middleman profit-taking as possible.

So provider-based health plans become the sponsors of self-directed primary care along the lines of the CVS Minute Clinic, for example. And following the information uncovered in good population health management tools, the health plan enters any activity that can help prolong the health of covered lives and eliminate care related expenses. The Kaiser-Permanente health care system is an excellent model of how it can be done across a large population.

My own experience at a major Texas health system and its integrated physician delivery component showed that a healthcare system can launch a successful provider sponsored health plan from scratch. Our plan grew to nearly half a million covered lives in less than five years.

The Baylor and Scott & White transaction shows a different way one health system chose to acquire covered lives by merging with a smaller system that owns a health insurance license.

When Sutter Health recently launched its health plan the CEO said he wished they had started sooner. His advice to other providers: plan on spending at leased $50 million. Good advice as you can never have too much time or money to get your health plan successful.

The important thing to remember is that fee-for-service is yesterday and provider sponsored health plans are the future of healthcare because they are the means to achieve the providers’ mission of improving the health of communities they serve.

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Neil Godbey is President of The Godbey Group, Irving, Texas. Since 1999 The Godbey Group has been helping leading hospitals and healthcare systems negotiate favorable managed care and value-based contracts.