As value-based care models have taken hold, providers have been venturing into the space currently occupied by health plans, but a new report shows most are failing financially.
Of 37 provider-sponsored health plans that have formed since 2010, only four established since 2010 were profitable in 2015, according to a Robert Wood Johnson Foundation report.
Another five have gone out of business, and two are in the process of being sold, according to the report by Allan Baumgarten, an independent research analyst.
Providers were attracted to the integrated benefits of starting a health plan especially after the enactment of the Affordable Care Act. They got access to the claims data needed for population health and gained a partner in pricing.
However, few plans have enough enrollees to manage risk and to achieve the economies of scale needed to affect competition and pricing, the report said.
Those provider-payer plans that do prosper, such as Kaiser Permanente, Geisinger, and HealthPartners, are able to offer comprehensive benefits at competitive prices.
The key to success for provider-sponsored health plans is the ability to deliver on a value proposition and to affiliate with physicians and hospitals to sell plans at a lower price than competitors.
However, in looking at 140 provider-sponsored health plans, the report found they were only able to price competitively by paying their own providers below market rates.
Many floundered under high claims cost for patients who were sicker than expected.
High-profile losses for provider health plans reportedly include CareConnect, part of Northwell in New York City, the Banner Health plan in Phoenix, and the health plan for Partners HealthCare System in Boston.
Catholic Health Initiatives of Englewood, Colo., and Tenet Healthcare in Dallas have their health plans for sale due to financial losses. CHI had been aggressively acquiring health plans.
On May 1, Tenet announced a new multiyear deal with Humana, saying then that all of Tenet's hospitals, hospital-affiliated outpatient clinics and employed physicians would be phased back into Humana's network between June and October, according to the Sun Sentinel.
The report said many provider systems are engaged in collaborating with payers around around clinical integration, performance based-contracting and population health. Medicare Shared Savings Program ACOs have shown success.
"These strategies are challenging, as is pursuing a health plan strategy, and success takes years to achieve," Baumgarten said. "Still, those capabilities have not yet been aligned with the health plan's operations."
Under the current administration's plan to repeal the ACA and Medicaid expansion, and cap Medicaid payments, the future of the remaining provider-sponsored plans faces even greater uncertainty, according to author Allan Baumgarten, an independent research analyst.