Watching the Cubs’ rise from lovable losers to World Series champions offers several lessons that can also be applied to providers looking to sponsor their own health plans. Perhaps “this year” has finally arrived for that concept as well.
Like the Cubs, provider-sponsored health plans have had some ups and downs dating all the way back to the 1970s. They had a nice run again in the 1990s in the form of Health Maintenance Organizations (HMOs), but then fell back into obscurity again. Just when people thought they were through, however, they’ve come roaring back with a vengeance. What has changed?
A different healthcare world
For one thing, we live in a very different world than we did back in the 1990s. The biggest change, of course, is the Affordable Care Act (ACA). It brought sweeping legislation that has created a financial impetus for providers through the shift from fee-for-service to value-based care. And while the ACA’s future is uncertain at this point, there appears to be support for continuing along the path to value-based care.
Previously, there was little financial incentive for providers to work as a team to contain costs. More care equaled more money. Now that notion has been turned upside down. In a value-based care world, where margins are thin and revenue is capitated, everyone must work together for the common good.
The ACA also drove the adoption of electronic health records (EHRs), which finally enabled all the information being collected individually in millions of paper charts to be aggregated into Big Data. And like in the front office of most Major League Baseball (MLB) teams, all that data is being used to power analytics that drive the decision-making process. Only instead of looking at on-base plus slugging (OPS) or wins above replacement (WAR), healthcare analytics are being used in population health management (PHM) to determine strategies for keeping populations healthy (or at least healthier).
That is important not just for the patients’ sake, but also for the financial model since healthy individuals cost far less to care for than sick ones. Over time the industry has learned that by focusing on wellness and closing care gaps, the overall cost of care comes down considerably. For provider-sponsored health plans PHM isn’t a nice to have; it’s a must-have.
The other major factor creating the opportunity for provider-sponsored health plans is the rise of narrow networks, where a health plan is tied to a specific hospital or health system, with stringent penalties for going outside the network. Payers are creating these plans in an effort to deliver more competitive options on the exchanges. This has providers coming to the realization that by creating their own plans they can capture that business for themselves/prevent it from going elsewhere.
Currently, the path of least resistance is to create a plan that can be offered to large local employers. By capturing an employee base of 5,000 or more employees, hospitals and health systems can make the numbers work for them while cutting out the competition. At least in theory.
This is where the lessons from Ricketts and the Cubs begin to come into play. After all, every MLB team wants to win the World Series. But actually getting there and winning takes more than a wish. It takes a smart strategy.
Follow a successful model
While it’s impressive to blaze a new trail, you can get to your goals much faster if you’re following a proven strategy. There are several provider organizations that have created successful processes for building and marketing their own health plans. These organizations understand the financial and care dynamics, and have a wealth of experience (as well as hard-learned lessons) to draw from. That is a significant difference from the 1990s when everyone was essentially taking their best guess at what might work.
Just as the Cubs followed a model that proved successful in Boston and other cities, providers looking to sponsor health plans should perform a deep dive into those examples and use them as guidance when developing their own programs. Hospitals and health systems are typically risk-averse, both on the clinical and financial side. Understanding what has already worked, and why, will help overcome objections and detail a clearer path to success.
Acquire the right expertise
If roughly 100 years of futility showed Ricketts anything it was that he didn’t have the expertise in-house to bring a home championship. So he went out and hired Theo Epstein and Jed Hoyer who had already done what he wanted to do with the Boston Red Sox.
Hospitals and health systems need to come to that same understanding. Creating and operating a health plan is very different than delivering clinical and financial services in a hospital. This is not something that can be assigned to the CFO, or the CIO, or HR or any other function on the current team. The organization must find experts for whom health plans are their core competency or they will most likely fail.
These experts must understand the legal and administrative aspects and have experience working with state regulators. They must understand how the plan needs to be funded, how to build a coalition between employers and health plans, and all the nitty-gritty aspects of plan management such as enrollment, premium collection, claims review, and denial management. They must know how to set up systems to collect the balance of payments from members as well. And they must do it all in a way that minimizes the administrative costs for the provider.
Option to outsource
The key difference between MLB and healthcare organizations is that the latter have the option of outsourcing all these functions to a partner that has already done it and has the processes and technology in place rather than hiring and building systems internally. A good partner will already have the resources, operational and training facilities, management and support teams, and statutory experience with the specific state (or others like it) in which the plan will operate. This deep experience will enable the health plan to get up and running faster rather than wait years to achieve their goals as the Cubs did.
Once they are in place the outsourcing partner will develop a clear plan that shows the organization the path to success, and every step along that path, with requirements and milestones built into each. Again, having a proven track record in creating and managing a health plan (as opposed to being a general consultant) is critical. It’s the same reasoning Rickets used in hiring Epstein and Hoyer. There were plenty of baseball executive available. But he wanted ones who had built an organization and won a championship. Healthcare organizations should look for a partner who has already done exactly what they want to do. Not just once or twice, but consistently over a period of years.
Raise the flag
There has never been a better time – or better incentive – for hospitals and health systems to launch their own health plans. Market and regulatory conditions have come together to create unprecedented opportunity.
That doesn’t mean it will be easy; there are still many unknowns. But with the right conditions and the right approach, healthcare organizations can work with large local employers to raise the win flag for everyone.
Daniel A. Schulte, MBA, CHFP, joined HGS, Inc. as Senior Vice President of Provider Healthcare, and is responsible for Operations and Client Development of all services HGS delivers to providers of healthcare, across the full spectrum of healthcare. He can be reached at daniel.schulte@teamhgs.com.
