Ascension considers major insurance play

Ascension Health is in talks to acquire an unnamed insurance company that operates in 18 states, which would be a significant escalation in the brewing shift among hospital operators toward the business of selling health plans.

The St. Louis-based system owns 101 hospitals and is the nation's biggest not-for-profit healthcare provider. Ascension Health President and CEO Robert Henkel said during an investors conference in New York that the potential deal is one strategy to boost the system's capacity to accept the financial risk of value-based contracts with employers and insurers. “We anticipate that we'll take more risk,” he said.

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Other executives—also presenting at the annual conference organized by Citigroup, the American Hospital Association and the Healthcare Financial Management Association—said they planned to enter or expand health insurance markets. SSM Health Care, the St. Louis-based operator of 16 hospitals across four states, is “very seriously” considering expansion of its recently acquired Wisconsin health plan to other states, said Dr. Gaurov Dayal, SSM president of healthcare delivery, finance and integration.

As early as next year, 89-hospital Catholic Health Initiatives will enter the marketplace with health plans developed by a newly acquired Arkansas insurer, said J. Dean Swindle, CHI's chief financial officer and president of enterprise business lines.

In Northern California, regional giant Sutter Health will expand the market for its year-old health plan and will seek a second insurance license to contract directly with employers, said its president and CEO Patrick Fry. And on the East Coast, New York heavyweight North Shore-Long Island Jewish Health System has projected its newly launched health plan will total 25,000 members by year-end, up from 10,000 this spring, said Michael Dowling, president and CEO of North Shore-LIJ.

But not every health system sees entering the insurance business as a necessary or attractive way to keep up in an industry moving toward managing population health.

Ochsner Health System in New Orleans divested its health insurance arm in 2004 and considered a return to the market, said Warner Thomas, Ochsner's president and CEO. Officials rejected that idea to hold onto capital for other investments.

But even those without plans to compete directly in insurance markets are working to thrive in contracts that include financial risk for managing medical costs.

Last October, San Diego-based Scripps Health began to negotiate incentives for all of its managed-care contracts, said Richard Rothberger, the four-hospital system's executive vice president and CFO. By January, every contract will include bonuses for reducing the cost of care for the covered patients and penalties if costs go up.

CHE Trinity Health, Livonia, Mich., is working to operate Medicare accountable care organizations across all 21 of its markets starting in January, said Dr. Richard Gilfillan, who joined the system last October as president and CEO after stepping down from the CMS Innovation Center. CHE Trinity Health already operates five ACOs in Medicare's shared-savings program, which uses cost control and quality targets to award bonuses or assess penalties.

Follow Melanie Evans on Twitter: @MHmevans



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