“I think that's ill conceived,” Dean said. “I think it's ultimately not going to be successful.”
The health insurance industry's expertise with projecting the demand and cost of medical care for a group of people, or population, is increasingly sought after by hospitals and medical groups. Providers are entering or considering contracts that reward or penalize them on their ability to manage health spending for a population, where such expertise would prove valuable. Medicare introduced and has expanded such contracts under the Patient Protection and Affordable Care Act's Shared Savings Program. Similar incentives are being used by a growing number of Medicaid and commercial insurance.
Dean said hospitals lack the expertise of insurers and Dignity Health's capital would be better spent elsewhere. Instead, Dignity Health will seek out partners with existing insurance companies.
He was equally skeptical of insurance companies' ability to become healthcare providers. (Highmark's acquisition of West Penn Allegheny Health System is a notable example.) “They ought to stay the heck out of running hospitals,” he said.
Dean described the current flurry of diverse acquisitions as a result of uncertainty over what will work and fear of being outflanked by competitors. “There's this hysteria going on,” he said. “Everyone is trying to be everything.”
The flurry of deals that have merged the traditionally combative healthcare sectors is “mixing apples and oranges,” Dean said. The results will be “inedible.”
However, Dean is not totally averse to sinking capital into insurance. Dignity Health will consider insurance investments in limited markets, where a deal can help to secure its position as a “mega player,” he said. That is the case in Arizona, where Dignity Health and Ascension Health jointly own Mercy Care Plan, a Medicaid managed-care company.
Dean made his remarks flanked by Dr. Glenn Steele, president and CEO of Geisinger Health System, and Wayne DeVeydt, chief financial officer of WellPoint. Geisinger, based in Danville, Pa., is a growing regional health system with a well-established health plan. WellPoint is one of the largest U.S. insurers.
Steele agreed with Dean. So did DeVeydt.
Steele rejected the notion that hospitals and insurance mergers are inevitable. “And I think much of it will fail. That's OK. Some of it will succeed.”
Geisinger was “wise or lucky” to have held onto its health plans over many years, Steele said. He was more doubtful about the prospects of entering the market now.
WellPoint recruited its newest chief executive from a large U.S. health system specifically to position the insurance company to work better in new partnerships with hospitals, DeVeydt said. That was Joseph Swedish, formerly the chief executive of Trinity Health (now CHE Trinity Health), who joined the company in March 2013.
None of this dissuaded Banner Health CEO Dennis Dahlen, who spoke later in the day at the conference. Banner Health officials are considering options that include building or buying a health plan. “We're not in the insurance marketplace in any significant way,” he said. “We're looking to grow that.”