How Do I: Become A Payvider?

In today's volatile payer landscape, introducing or expanding a provider-sponsored health plan can be a powerful way to stave off skirmishes and improve care for your community. But it's "not for the faint of heart," says one CFO in the know.

As reimbursements dwindle and denials mount, some health system CFOs are eyeing insurance plans of their own to weather the storm.

Aside from staving off skirmishes with external payers, proponents say it's a way to boost care quality, integration, and affordability for their communities.

But that doesn't mean it's easy going.

"It is not for the faint of heart," says Robin Damschroder, MHSA, FACHE, executive vice president and chief financial and business development officer at Henry Ford Health (HFH), which has more than 250 care locations, including five acute care hospitals; more than 33,000 team members; and upward of 650,000 covered lives throughout Michigan. "You do have to live through the insurance cycles."

For HFH—whose Health Alliance Plan (HAP) was born in 1960 from automaker union and community members championing high-quality, affordable healthcare—that's meant braving everything from the genesis of DRGs and tightly managed care in the 1980s and 1990s to the emergence of Medicare Advantage in the 2000s.

Sure, it's a rollercoaster, but success is possible with staying power and prowess. Here’s how to do it.

WHAT DOES IT TAKE and how do you do it?

Clear benefits aside, getting an in-house offering up to scale at speed is a big challenge.

"What we've seen over the past 10 to 15 years is provider-sponsored health plans that are really challenged to grow a large enough market share or bolus of members to mitigate risk, particularly in a new insurance company," says Brian Fisher, Guidehouse's director of healthcare strategy, provider and payer. 

To ramp up, providers often accept "significant discounts on their own health plan," says Richard F. Bajner, partner and payer and provider leader at Guidehouse. And with capital constraints being what they are today, CFOs should ask themselves whether these cuts, which can be as high as 30% to 50%, are the right move.

Here's what can make the juice worth the squeeze.

Analysis: You need a good read on the regulatory environment, especially for government payers, as well as the competitive landscape for commercial entities, Damschroder stresses. And that includes what's on the horizon. "We've had to change with the times as different programs and different emphases come into play," she says. Without this expertise and foresight, "you can lose a lot of money, and then quickly, it feels like a money pit."

Capability: Sponsoring a health plan requires "a completely new set of capabilities, particularly on the administrative end, that, without a partner, have to be created from scratch or contracted out," Fisher says. So prioritize finding the right collaborator—or developing the requisite skill sets in house, Damschroder advises.

Balance: Ensure your offering covers people in a range of health circumstances, or risk getting "kicked out of the market," Damschroder says. "When you look at the COVID cycle that's just gone on, there's been a lot of volatility in medical claims, right, and you actually have to have the fortitude to maintain your risk-based capital with the department of insurance in your state," which wants to know that you're "investing and supporting the medical claims activity."

Stamina: This isn't "a get rich quick scheme," Damschroder says. "You have to be in it for the long term; it's not a three-to-five–years game where you're automatically going to be making money." It means "doing what's right for the community and getting those health outcomes," as well as "pricing reasonably" and making enough profit to cover losses, particularly in the Medicare and Medicaid domains. Also look for openings in the market.

As an example, UnitedHealthcare is focused on profitable services (e.g., ambulatory and physician) and "staying away from hospitals," Damschroder says. "That would be our domain."

(More) collaboration: "Many times, even within a health system that has a payer and a provider side, they still are not as close as you would think they were," says Richard L. Gundling, FHFMA, CMA, senior vice president of content and professional practice guidance at HFMA.

That's because infighting can flare around competing priorities, such as how to handle administrative hurdles like prior authorization and medical necessity. And it's the patients who suffer most.

"If somebody really needs back surgery, let's not delay it for three months to get them that surgery or to have them scared that they're going to get a huge bill at the end of it," Gundling says. "They're having back surgery. Let's alleviate that other stuff."

It takes a balancing act, Damschroder says. "Culturally, you have to be suited for that tension, and I think you also have to be well invested in the health of the population—of what you can do together, versus separately," she explains. 

HFH has worked hard over the past two years to integrate its care management team across its provider and payer entities. The partnership has produced a protocol of care that limits pre-authorization requests between HAP and HFH to a handful of circumstances, such as when certain new drugs are in play or there's variability in how a service is being delivered across the system.

"Our clinicians and our medical management team at the plan have been able to come together to develop processes that aren't an administrative burden, don't cost a lot of money, and better yet, the patients' speed to care treatment is quicker," Damschroder explains.  

Resolve: If a plan of your own is the right fit, don't let the challenges scare you away from a model that could improve care quality, access, and affordability for those you serve. "We're highly integrated into our communities, and I think we're a very important part of this ecosystem," Damschroder says. "There's a danger if we just hand this over."

This article is part of HealthLeaders’ How Do I? series. Read the entire article by Delaney Rebernik here.