Vital Signs Blog

Hospitals seeing benefits of partnering with insurance companies

Two years ago, Florida Hospital successfully sought a state license to operate its own health plan. That plan soon stalled, as officials realized the cost and time required to build an insurance arm would be too great.

A faster route, they decided, would be to buy one.

Last week, the mammoth hospital (with multiple campuses in and around Orlando) announced a deal to acquire up to 49% of Health First Health Plans. The joint venture will give Florida Hospital rapid access to the information technology and expertise that it needs to sell health insurance, said Michael Schultz, president and CEO of the Florida region for the Adventist Health System, which includes Florida Hospital. “We're a hospital company,” he said.

More and more hospital companies like Adventist Health System are diversifying into insurance as the lines between the healthcare industry's sectors blur with dealmaking that has followed the 2010 healthcare reform law. In Massachusetts, Michigan and Washington, prominent health systems have acquired insurance companies while others in California and New York decided to form their own.

Schultz cited common reasons for Florida Hospital's move into insurance. Hospitals, which have data contained in patients' medical records, can combine additional data from insurers' medical bills to identify treatment gaps that undermine patients' health and increase costs. Insurance experts also know more about how to manage the financial risk under new payment models that require hospitals and doctors to manage healthcare spending or eat losses, he said.

The Patient Protection and Affordable Care Act seeks to test and potentially expand the use of the payment models, such as accountable care and bundled payments. Meanwhile, commercial insurance giants have embraced the models with a steady stream of new contracts that include financial incentives to slow health spending and meet quality performance targets.

Florida Hospital has not yet acquired a stake in Health First. The partners will first see how successful a joint effort will be with a Medicare managed plan to be marketed in two Florida counties. The managed-care plan will be operated by Health First, but will be sold under Florida Hospitals' brand. Florida Hospital will also keep any profit or absorb any losses for the health plan, based on spending for patients enrolled in the plan.

“We have to make it work,” Schultz said.

Follow Melanie Evans on Twitter: @MHmevans


Loading Comments Loading comments...