Health Systems Get In The Insurance Business

Some hospital networks are cutting out the middle man and becoming insurers, themselves, Kaiser Health News reported. As a growing response to flat-rate payments for care rather than the traditional fee for service, hospital chains are making the move to change their business model.

“This is a huge, dramatic cultural shift,” Michael Dowling, president and CEO of New York-based North Shore-LIJ Health System, said about its venture into the insurance business. With calls for cost savings and effective care, hospitals acting as insurers will mean a focus on preventative care, Dowling told KHN.
Along with North Shore-LIJ Health System, other systems including Washington and Baltimore-based MedStar Health, Ford Health System in Detroit and UPMC in Pittsburgh, Sentara Health Care in Norfolk, Va. and Inova Health System in Falls Church, Va., also have insurance entities. An estimated 20 percent of networks market an insurance product, while another 20 percent are exploring the option, according research firm the Advisory Board Company.
Among providers’ reasons for making the insurance move is a laundry list of complaints with traditional insurers: denied claims, low reimbursements, late payments and red tape, another KHN article noted. Providers that assume the financial risk mean they may have more control in care and cost decisions.
Although one of the motivations behind this type of provider insurance is streamlined care and cost-savings, skeptics worry it teeters on the managed care model of the 90s, which many said was a failure.
“Hospitals think this is a way to cut out the middle person, tailor care more closely and save a lot of extra money, but there’s a history to this and it generally doesn’t work,” said Howard Berliner, a visiting professor of health policy at New York University. “It winds up being incredibly complicated.”
However, some things have changed since then, including the advancement of electronic health records, which presumably will provide better patient data and information for referrals, KHN noted.
For more information: – read the KHN article on hospitals becoming insurers – here’s the KHN article on hospitals’ complaints about insurers


From a Mid West Consultant

It’s the HMO model all over again. It won’t work. They will overcharge themselves, the same way they do the patients/insurance companies they now deal with.

From a medical audit firm:

XXXX plans to be a support player in the community health system world.  The chairman of XXXXXXXXX told me that the Blues will lose 15% of their market share to such systems in the next 5 years.