National hospital operator Catholic Health Initiatives made an early and decisive push into health insurance after the Affordable Care Act became law. Now that strategy is under review as the system's operations flag.
“We are looking at a strategic realignment,” said Dean Swindle, chief financial officer for the Englewood, Colo.-based system, in response to an analyst who asked whether CHI would sell Prominence Health, the system's insurance arm. “We do need to look at every strategic option,” he said.
Operating losses at Prominence Health, which has Medicare Advantage and commercial plans in six states, contributed to the system's disappointing results during the first six months of its fiscal year. The system has struggled in some markets after a string of acquisitions that doubled CHI's annual revenue in five years to $15.2 billion. CHI closed its books on the six months that ended Dec. 31 with an operating loss of $96.1 million on revenue of $8 billion.
A turnaround underway will target losses at Prominence and at the system's hospitals and ambulatory operations.
Medicare Advantage enrollment will be curtailed or suspended and the system will move in the next three to four months to sharply reduce the health plan's losses. The system will focus on maintaining the existing Medicare Advantage members, Swindle said.
CHI has hired consultants to help with the turnaround, Swindle said. “I would tell you the intensity of our review does have something to do a bit with given where our current performance is,” he said. “Maybe we need to partner more now, given where our performance is.”
Swindle described the strategic review of Prominence Health as natural after recent aggressive growth. “We're at a very natural point that we need to reflect,” he said. More changes are expected in the next nine months to a year.
The system has hired insurance executives and acquired plans in recent years to pursue its strategy, which executives said would seek to market its health plans directly to employers. Other major health systems such as Ascension Health, St. Louis, and Northwell Health, formerly the North Shore-LIJ Health System, have made similar moves.
Swindle said little about what's next for Prominence Health, but he stressed the system continues to believe that insurance capabilities are important.
“It's just a pause to right-size where we are to ensure the operating performance is consistent with what we need,” he said of the strategic review. "Are there other ways we can go about this strategy? And honestly, are there other methods of achieving the same objectives?”
