Wednesday, August 21, 2013

If you can't do one thing well, add another

A recent article in HealthLeaders Media covers a new trend, provider organizations branching out into the insurance industry.  Here's the lede by Margaret Dick Tocknell:

Health systems are increasingly taking on new roles and becoming health insurers. Spurred by healthcare reform, the creation of health insurance exchanges, and a shift to population health, health systems are assessing the opportunities of becoming a payer against the risk of taking that step in the ever evolving healthcare industry.

A growing number of health systems are deciding that it is worth the risk. In a June survey of more than 100 hospitals and health system across the country, 34% responded that they already own health plans. Another 21% said they plan to launch a health insurance plan by 2018, according to the Advisory Board Co., a Washington, D.C.-based research and consulting firm.

There are groups that have done this with notable success, like Geisinger, but as the article notes, "jumping into the health insurance game is not a parlor game.... [D]ecades ago hospitals and health systems lost a lot of money trying to take on capitation and broader risk.  Also, shifting from provider to provider-payer is a huge cultural change that involves thinking beyond managing facilities and capacity to a more holistic approach to patient care."

Here's what I think, based on unscientific site visits, surveys, and discussions with hospital leaders.  The vast majority of hospitals--and especially academic medical centers--have barely begun to crack the operational problems that exist in their facilities.  The quality and safety of patient care are substandard, compared to what they might be and what has been demonstrated in comparable facilities.  The degree of patient-centeredness, likewise, needs major work.  Finally, the engagement of front-line staff in process improvement efforts is scattered.

CEOs and Board of Trustees are understandably ill at ease with all of the changes occurring in the health care world, but it feels like the management consultants have been hard at work persuading this audience that the solution to the changing health care environment is to look outward rather than inward.  Grow and consolidate with mergers and acquisitions to create scale in a given geographic area.  And, now--as reflected in this article--bolt on an insurance plan with which you will share risk.

The problem is that the current generation of hospital CEOs and other C-suite members have no experience with these new business formats.  Even if these plans and activities appear to be attractive in the consultants' pro forma presentations, executing them is distracting and demanding and requires a different skill set that has led the current generation to their current positions.

Hospital CEOs would be better off creating trusting and reciprocal clinical relationships with other institutions and practices along the spectrum of care.  Likewise, they would be better off learning how to negotiate with insurers in the new environment by helping to develop commercial relationships that are mutually advantageous.  Meanwhile, let's get really good at providing a safe and high quality clinical environment, with an intensive and extensive partnership with patients, while engaging our staff in the kind of process improvement that leads to a better work environment and greater efficiency.


Barry Carol said...

Aside from Kaiser and Geisinger, I wonder how much these hospital owned insurance companies earn in profits as a percentage of premium revenues each year and how much they collect from their captive insurers for hospital based care vs. how much is collected per service, test or procedure from other commercial insurers. Successfully assuming actuarial risk with or without reinsurance is no simple matter.

Mark Graban said...

It's interesting that ThedaCare, a great lean / operational / quality improvement hospital sold off their health plan...

Mitch said...

Good points about providers taking on risk, becoming insurers especially the cultural aspect. Too many people view insurance and risk management as easy until they try and do it. Dull, uninspiring at times and always frustrating, but not easy.

Linda Galindo said...

BAM!!! Hit the nail on the head. "Hospital CEOs would be better off creating trusting and reciprocal clinical relationships with other institutions and practices along the spectrum of care."