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The impact of integrated health care delivery systems is growing

Posted by Laura McMullen on Thu, May 28, 2015

Hospitals have always had informal networks of nearby physicians with admitting privileges as well as staff physicians. And some hospitals and health systems, particularly those that self-insure, have long required employees to access care within their organization to help control costs. With a new set of incentives in the Affordable Care Act that encourage providers to focus on outcomes instead of activity, these practices came together to reduce the barriers to entry in the health insurance industry and create new entities that compete for premium dollars.

Cutting Out the Middlemen

hospitalLarge hospitals and local or regional health systems have formed insurance companies that sell plans to employer groups and individuals, i.e. North Shore – Long Island Jewish Hospital’s CareConnect or UPMC in western Pennsylvania. Dr. Kenneth L. Davis, CEO and president of Mount Sinai Health System in New York, said, “Inevitably the large systems are going to move to take part of the premium dollar,” in an article in the Fiscal Times after the 2014 Health Care Forum in Washington, DC, sponsored by The Atlantic. He went on to discuss the importance of “retaining more and more of the health care premiums paid by consumers is essential to providing a full spectrum of care.” For example, St. Luke’s Hospital, part of the Mount Sinai Health System, lost $14 million in its psychiatric program in 2013 and needs to be subsidized by revenue from other parts of the system. Offering insurance coverage is another way to do that.

Partnering to Compete

Some insurance companies own hospitals, other facilities, and physician groups which are included in their networks, for example Kaiser Permanente or Willamette Dental Group. Others choose to create new companies such as the joint venture between Anthem and seven Southern California hospitals when they formed Vivity Health Plan. Vivity is priced below Anthem’s standard HMO plan and includes the big academic medical centers consumers want access to, according to the LA Times. This new market entrant could take business away from Kaiser Permanente in the large Southern California market.

Too Big to Fail?

Another approach is for hospitals to merge. There were 95 hospital mergers and acquisitions in 2014, according to The ObamaCare Effect: Hospital Monopolies in the Wall Street Journal. Two acquisitions are being challenged in state court:

How does this trend play out in your network? Does hospital consolidation make it easier to set up a narrow network? Or is this an opportunity to add more locations and providers through the physician groups that are included in integrated health care delivery systems?

Tags: health insurance, narrow networks, Affordable Care Act, health reform, consumer choice, insurance companies

 

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