Healthcare's latest wave of dealmaking includes hospital operators looking for a foothold in the insurance market.
In October, Detroit Medical Center entered the Michigan Medicaid market when it acquired ProCare Health Plan. Partners HealthCare System in Boston acquired its first insurer, Neighborhood Health Plan, a managed-care plan. And Catholic Health Initiatives, one of the largest U.S. Roman Catholic health systems, said it reached an agreement to buy a majority stake in Soundpath Health, a Medicare managed-care provider in Federal Way, Wash., for more than $24 million.
The Catholic Health Initiatives acquisition, which must be approved by the state's insurance commissioner, would give the system access to the plan's trove of data on patients' medical care and costs, which the system's executives believe could be analyzed to bolster prevention efforts and reduce spending, said Dr. Christopher Stanley, the system's vice president of care management.
Soundpath Health would be the system's first insurance company in Washington and its second investment in a health plan. Catholic Health Initiatives owns a minority stake in an Arkansas commercial insurer.
“Since a health plan pays all of the claims for an individual or a population, they capture a lot more data and a lot more information in a timely way,” said Stanley, who joined the Englewood, Colo.-based system three months ago from UnitedHealthcare, where he was chief medical officer for the Rocky Mountain region. Stanley oversaw the insurance giant's efforts in Colorado to analyze data and design intervention for preventive care and disease management for larger populations.
Stanley said the health plan acquisition was not tied to recent hospital deals Catholic Health Initiatives announced in Washington, one of its three largest markets with more than $1 billion in operating revenue last year. Catholic Health Initiatives said last week that it agreed to acquire Harrison Medical Center, Bremerton, Wash., and entered into talks this summer to acquire Highline Medical Center in Burien, Wash. Under a deal that is expected to close by June 30, CHI would merge its Franciscan Health System, Tacoma, Wash., with the PeaceHealth system, based in Bellevue, Wash.
Stanley declined to say if Catholic Health Initiatives would seek to acquire additional insurers, but said the system was seeking acquisitions or other deals with hospitals, doctors, insurers or other organizations to develop its ability to manage population health. The system will launch population health pilots among its employees in Des Moines, Iowa, and Lincoln, Neb., starting in January.
The Detroit Medical Center deal positions the system to expand its market share under the scheduled expansion of Medicaid in 2014 and an entry into the commercial insurance market is expected to follow, said Carrie Muller, ProCare Health Plan's president and CEO and senior vice president of Vanguard Health Systems, which acquired DMC in 2011.
DMC officials also see access to aggregated data as one potential advantage to its acquisition of ProCare Health Plan, Muller said. Detroit Medical Center can potentially better manage risk from new payment models by using data to identify conditions for which the system could target prevention and disease management programs, she said.
Policymakers are seeking to shift financial risk for the cost of patient care to providers under new payment models, such as ones that tie bonuses to spending targets or pay providers a lump sum to treat a patient or specific condition, said Marsha Gold, a senior fellow for Mathematica Policy Research.
Hospitals can look to the sector's last entry into insurance during the managed-care growth of the 1990s for potential pitfalls as they consider current strategies, she said. Hospital health plans, she said, must manage patient care or they risk the losses and backlash that undermined the HMOs of that era.