Dignity Health is preparing to apply for a California health insurance license that will allow the San Francisco-based health system to accept full financial risk for patients' medical care.
In January, the system formed Dignity Health Provider Resources, a not-for-profit that will seek a limited Knox-Keene license. Such a license is required in California for health systems to enter into contracts with financial risk for the full spectrum of a patient's care.
Dignity “will assume full financial risk for professional, hospital and other covered services” under contracts with California health plans, the system said in records provided to its lenders. Dignity “has not previously assumed full risk in this manner.”
Dignity Health declined to comment on its plans.
The license will not allow Dignity to market a health plan, but will allow the system to accept full risk under contracts with insurers. Lloyd Dean, CEO of Dignity Health, has said the system would not create its own insurance company. “I think that's ill-conceived,” he said. “I think it's ultimately not going to be successful.”
Dignity operates hospitals across three states—Arizona, California and Nevada—but its officials have expressed bigger ambitions. It acquired U.S. HealthWorks, a 20-state operator of urgent-care and occupational health services, in August 2012.
The strategy is increasingly common as Medicare, Medicaid and private health plans introduce incentives that can boost or erode hospitals' and medical groups' revenue based on their ability to manage the cost of patients' care. Medicare officials and major providers and insurers recently pledged to increase such incentives.