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Reform Update: Adventist Health seeks insurance license


By Melanie Evans
Posted: July 17, 2013 - 3:30 pm ET
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The push by hospital operators into the health insurance business continues as pressure increases to prepare for alternatives to fee-for-service payment.

Adventist Health, a large California-based health system with 18 hospitals in four states, is expected to seek California's approval for an insurance license before the end of the year. It would be Adventist's first insurance license, though it will be a limited license.

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The system joins a number of other health systems with recent deals or plans to acquire necessary state approval for health plan operations, either by seeking a license—as was the case with Sutter Health and North Shore-LIJ Health System—or by acquiring an insurer. That's what Catholic Health Initiatives did recently in Washington state.

Steve Nolte, CEO of Sutter Health's insurance arm Sutter Health Plus, said his health system sought to gain more direct control over the delivery and financing of healthcare with its newly licensed insurance operations. Data captured by the insurer will better inform efforts to identify quality and efficiency gains, he said, which appears to be “the mission of reform,” he said.

For Adventist, an insurance license will better position the health system to take on financial risk for patients' care under new, global payment contracts with private insurers, Medicare and Medicaid that have emerged across the industry and under the Patient Protection and Affordable Care Act, said Jeff Conklin, Adventist Health's vice president of payer and network strategies.

Adventist will seek a limited license that would allow it to enter into contracts with more financial risk, but does not allow Adventist to sell insurance directly to consumers, he said.

Meanwhile, Sacramento-based Sutter Health will launch its first health plans next January after winning regulatory approval last spring. Sutter operates 23 hospitals in California and one in Hawaii.

Hospital-owned insurance companies may also give providers the ability to negotiate directly with employers. Earlier this year, Presbyterian Healthcare System, which owns its own insurance arm, contracted directly with Intel Corp. to cover the computer chipmakers' workers in Rio Rancho, New Mexico.

Pioneers no more

Nine of Medicare's first accountable care organizations, labeled “Pioneers” by the agency, said they would not continue with the Pioneer program. Seven will switch into Medicare's less-risky test of accountable care, which puts them at lower risk of losses. The ACO model is a largely untested model that rewards or penalizes hospitals and doctors based on how well they hold down costs and improve quality. Two Pioneers will drop out entirely from Medicare accountable care: Presbyterian Healthcare Services and Plus, which is an ACO that includes North Texas Specialty Physicians and Texas Health Resources. The CMS released results from the first year of the Pioneer experiment, which ended last December. The 32 Pioneer ACOs that completed the first year all met Medicare's quality benchmarks. But only 13 achieved enough cost savings to earn bonus payouts.

Equifax hired to verify incomes for health exchanges

The Obama administration has hired the credit reporting firm Equifax to verify the incomes of Americans who apply for subsidies to buy health insurance on the new state insurance exchanges, the New York Times reported. Under the contract, Equifax Workforce Solutions will provide real-time information to the state exchanges using information provided by employers. It's also supposed to provide information about whether people have employer health benefits. The contract is potentially worth more than $300 million over five years. The announcement comes amidst criticism that the administration has no way to prevent people from lying to qualify for subsidies, following the decision that the IRS would delay its role in verifying income.

When doctors don't refer for labs

A newly released report by the Government Accountability Office suggests that doctors who own laboratory services may overuse them, Modern Healthcare's Jaimy Lee reported. Doctors who perform their own lab work do more testing than physicians who refer tissue samples to independent laboratories. That amounted to a $69 million difference for Medicare spending on anatomic pathology services in 2010. Medicare laboratory spending also grew faster among doctors who analyze their own samples compared with those who don't, Lee reported. Urologists, dermatologists and gastroenterologists were most often those who owned a laboratory.

Follow Melanie Evans on Twitter: @MHmevans


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