Anthem hatches another hospital joint venture, this time in Wisconsin
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April 20, 2016 01:00 AM

Anthem hatches another hospital joint venture, this time in Wisconsin

Bob Herman
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    Aurora St. Luke's Medical Center

    Roughly 18 months after Anthem rocked the healthcare business community with a new provider-insurance alliance in California, the health insurer has formulated another similar project. Anthem and Aurora Health Care will co-own a new health insurance company.

    Anthem's Wisconsin subsidiary and Aurora, a 15-hospital system based in Milwaukee, will each own 50% of Wisconsin Collaborative Insurance Co., a newly licensed insurer. The joint venture somewhat resembles Vivity, the health insurance product created in September 2014 by Anthem's California subsidiary and seven Southern California health systems, including academic medical centers Cedars-Sinai and UCLA.

    The latest joint venture is further evidence that health plans and providers, traditionally adversaries, are finding that they need to work together to adapt to the delivery system reforms baked into the Affordable Care Act. Organizations are looking for ways to slow healthcare spending, improve clinical quality and patient satisfaction, and reward hospitals and doctors that do both. While efforts like Anthem and Aurora's company offer fresh takes on the country's healthcare cost and quality problems, executives still have to prove their ideas lead to real-world results.

    “If you bring the power of a major national insurer together with a large regional healthcare system and let them both do what they are good at, you begin to get a better solution for the patient,” said Dr. Nick Turkal, CEO of Aurora Health Care. Anthem will tackle the insurance functions, like claims services and actuarial rate-setting, while Aurora will handle care and disease management.

    The Wisconsin Collaborative Insurance Co. will offer a commercial health plan called Well Priority to fully insured and self-insured employers. Coverage will go into effect Jan. 1, 2017, although the insurance company will be operational by this year. There are plans to include Medicare, Medicaid, individual and small group products, but in the immediate future the company will only target traditional employers, said Larry Schreiber, CEO of the joint venture who also serves as president of Anthem's Empire Blue Cross and Blue Shield insurer in New York. Schreiber previously was CEO of Anthem's Wisconsin subsidiary.

    Both organizations also will focus on members who have chronic health conditions and steering members toward preventive care and healthy lifestyle choices.

    What makes the Wisconsin joint venture different from Vivity is the financial risk within the product's network. Only Anthem and Aurora split the profits and losses 50-50, but Aurora is not the only provider system within the network.

    Some would call WCIC's product a spin on a narrow-network offering, a controversial strategy in which patients have more limited care options, but executives have tagged the so-called Blue Priority network as “high-performing.” In other words, Anthem and Aurora believe the in-network providers have high quality grades, and they keep costs down better than others.

    Aside from Aurora, several other health systems scattered throughout the state will be part of the network: Aspirus, Bellin Health, Children's Hospital of Wisconsin, Gundersen Health System, ProHealth Care, ThedaCare, UW Health and UnityPoint Health-Meriter, along with some other clinics and physician groups. None of those systems outside of Aurora has an ownership stake in the new insurer, and many are involved in a separate provider alliance called AboutHealth. But like Vivity, the joint venture blends elements of HMOs and accountable care organizations.

    That also comes with potential backlash. Providers that aren't included in Anthem and Aurora's network may therefore be viewed as having lower quality or higher costs, and patients that want access to those doctors and hospitals will have to shoulder higher out-of-pocket costs.

    “There is additive value by redirecting members to these best and brightest systems,” Schreiber said. However, he doesn't think the new alliance will hinder Anthem from working with other providers in the state. “We're comfortable that we are going to be well-positioned to continue to drive those types of innovations broadly across the market.”

    Wisconsin-based health systems have trended ahead of the nation by owning or partially operating a health insurance plan. But Aurora, a system that posted more than $4.9 billion of revenue (PDF) and $462 million of operating income in 2015, has been an outlier.

    Turkal said starting a health plan from scratch was “not optimal,” but the system also knew it could not rely on existing fee-for-service insurance relationships. It opted for the middle ground.

    “If we have a joint venture insurance company, we can have a great deal of say in how we design plans for patients,” Turkal said. “Is there some risk? Of course,” he added. “Anyone who doesn't like risk ought not to be in healthcare today.”

    The rise of hospital-owned health plans does not guarantee success, however. Hospitals tried their hand at the insurance business in the 1990s. Many of those attempts crashed and burned, and many providers sold off their struggling health plans.

    Anthem CEO Joseph Swedish hinted last year the Indianapolis-based insurer could try other joint ventures like Vivity elsewhere around the country. Anthem and Aurora have been working on their deal since February 2015.

    “Might it work elsewhere? Maybe,” Swedish told Modern Healthcare soon after the Vivity announcement. “Would some variation on the theme work elsewhere? Probably.”

    So far, Vivity has enrolled 24,000 group members, many of whom switched from Kaiser Permanente. Vivity was widely viewed as a way to eat into Kaiser's California dominance and attract more employers to alternative plans.

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