CHI increases its insurance presence with HMO deal

Acquisition-hungry Catholic Health Initiatives has announced a deal for QualChoice Holdings, Arkansas' second-largest HMO. Terms of the deal were not disclosed and must be approved by the Arkansas Insurance Department.

Under terms of the deal, CHI would buy out QualChoice owners TriZetto Corp., the University of Arkansas for Medical Sciences, Tenet HealthSystem Medical, Arkansas Children's Hospital and QualChoice of Arkansas. CHI's Arkansas-based subsidiary St. Vincent Health System is also an existing owner in QualChoice.

The purchase would extend CHI's reach in the health insurance market, which the Englewood, Colo.-based system cemented last year with the $24 million acquisition of Soundpath Health, a Federal Way, Wash.-based Medicare Advantage provider that insures 17,000 individuals.

Little Rock, Ark.-based QualChoice, which operates across Arkansas and whose health plans cover 70,000, is not a Medicare Advantage provider but will likely enter that market, said Michael Stock, CEO and president of QualChoice.

The managed Medicare market is one that CHI's Michael Rowan described during a recent interview as “a low-risk means of getting into the insurance business.” Rowan, the system's president and chief operating officer, said during an interview during the American College of Healthcare Executives annual meeting in Chicago last month that CHI officials were in talks to acquire other Medicare Advantage providers as part of a national expansion of its insurance assets.

“Our goal is not so much to buy a Medicare Advantage program for a specific market, but to bring in the skill sets and the infrastructure to use across all of our markets,” he said.

QualChoice will likely serve as the backbone of the health system's national insurance expansion, Stock said. CHI operates across 18 states with a growing number of hospitals that totals 89 after a series of recent deals, including acquisitions in Washington, Nebraska and St. Luke's Health System in Houston, Texas.

Its rapid expansion and recent physician hiring are part of the system's push to enter into contracts with insurers or directly with employers that offer financial incentives to improve overall population health, Rowan said.

Contracting directly with employers could put the health system in competition with existing health insurance companies, Rowan said. “There may be opportunities where we recognize that there are certain skill sets that make sense that the payers have. We could work in partnership with them,” he said. “But we're going to try to learn along the way and forge our own model. And so, down the road, I think it creates the opportunity for more players in the business.”

As early as next year, the health system may offer new insurance plans developed with QualChoice in markets outside of Arkansas, Juan Serrano, CHI's senior vice president, payer strategy and operations, said in an interview as the deal was announced.

Follow Melanie Evans on Twitter: @MHmevans