Piedmont Healthcare and WellStar Health System, two powerful medical organizations, are moving into a new realm: health insurance.
The hospital systems intend to create a health plan that will offer Medicare Advantage and commercial insurance in 2014, as well as serving the two organizations’ employee base that, with their families, exceeds 35,000.
The insurance plan follows the announcement last month that Piedmont and WellStar had formed a collaboration to develop health care delivery models.
Piedmont and WellStar combine 2,393 hospital beds, 10 hospitals, seven urgent care centers and more than 700 physicians.
WellStar dominates the suburbs west and northwest of Atlanta, while Piedmont has extensive operations south of the city, along with its prestigious hospital in Atlanta’s affluent Buckhead district.
The Wall Street Journal reported that in recent months, Northern California’s Sutter Health and New York’s North Shore-Long Island Jewish Health System have said they would start selling health plans. A 2011 survey of 100 hospital leaders by health research firm Advisory Board Co. found that 20 percent of them intended to market an insurance plan.
Some systems with limited insurance operations are expanding, including MedStar Health in the Baltimore-Washington area, which will add Medicare plans next year and is likely to have a plan on the Maryland health exchange, the Journal article said.
Driving the trend is the pressure to reduce costs, as well as the revolutionary changes set in motion by the Affordable Care Act.
A leader of a health insurance trade group in Georgia told GHN on Monday that Piedmont/WellStar will be an interesting partnership to watch.
Graham Thompson, executive director of the Georgia Association of Health Plans, noted that a previous insurance offering by another local hospital system organization, Promina, failed to gain a strong foothold a decade ago.
“They weren’t so adept at the back office’’ functions, he said.
It may be difficult for Piedmont and WellStar to cover the whole metro Atlanta area, Thompson said, noting that large employers have workers all over the region.
And he questioned whether Piedmont’s and WellStar’s relationships with traditional insurers will change by their becoming a health plan competitor.
Some hospital organizations, including the University of Pittsburgh Medical Center and Intermountain Healthcare in Utah, long have had health plans, the Journal article noted. Others, including some health systems considering them now, have tried and failed with them in the past.
The failures, the Journal reported, reflect in part the difficulties of reconciling conflicting interests: Hospitals typically make money when they fill their beds with patients, and health plans pay the bills for those admissions.
Piedmont said Monday in a press release that it began developing a health system-based health insurance plan in July when it partnered with Evolent Health, created in part by the University of Pittsburgh Medical Center. The Pittsburgh organization has one of the country’s most successful health system-based health plans, the news release said.
”We believe our industry’s future relies on successfully implementing a population health model of care – delivering disease prevention and care management with higher quality at lower costs,” said Gregory Hurst, president and interim chief operating officer at Piedmont. “Launching a health plan helps us move more quickly toward that future, and we consider this yet another area where we can demonstrate vision and leadership in Georgia’s healthcare industry.”
Reynold Jennings, president and CEO of WellStar, added that Piedmont and WellStar “are uniquely positioned to work together to achieve improved clinical results and reduction in costs” as called for in the Affordable Care Act. “Health systems that have a broader geographic reach and larger population base will be best suited to react to and sustain operations regardless of future federal and state legislative outcomes.”
Dr. Ronnie Brownsworth of Piedmont, a neurologist, will be CEO of the newly formed health plan.
“This health plan will keep patients and physicians at the center of our care model with the ultimate goal of improved health in our patient populations,” said Brownsworth in the press release. “We also look forward to continuing our work with other insurance plans in finding ways to deliver the best results for our patients.”
David Smith, a consultant with Kearny Street Consulting, told GHN on Monday that it’s a tough time to enter the health insurance business.
“Even the big guys [insurers] are having a very hard time figuring out what lies ahead with Obamacare,’’ Smith said.
The big unknown, he said, is how to price coverage under the health reform law’s new requirements.
“It’s going to be a new day in insurance,’’ Smith said. “To enter the market right now is a little scary.’’
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