“Health insurers as we know them will be dead by 2025” – That was the headlines on Reuters news service last year, summarizing an interview with the always controversial Ezekiel Emanuel, M.D., former Special Advisor for Health Policy for the Director of the Office of Management and Budget. Dr. Emanuel said, “We will have large integrated delivery systems, like Kaiser, that people will choose from, and we will get our care from them. I call it Kaiser-fication.”
But before everyone jumps for joy (a natural reaction given the Harris survey results that found only seven percent of Americans trust their health insurance company – America’s least-respected industries: How does insurance fare?), the operational part of the above statement from Dr. Emanuel is “as we know them.” I don’t see the health insurance companies going away (though they are getting larger – ‘Diversified’ Insurance Companies). But I do see health insurance plans and health systems slowly morphing into the same type of system. My colleague Sharon Hicks, the Chief Operating Officer of Community Care Behavioral Health, described it best in her presentation at the 2013 OPEN MINDS Performance Management Institute – Performance Measures: What Payors Are Looking For From Provider Organizations. This is the emergence of combined health care delivery and health care financing organizations. This is the “Kaiser-fication” that Dr. Emanuel is referring to.
So what does this transmogrification look like? For traditional health insurance organizations, we see two major strategies – acquisition/development of provider capacity and gainsharing agreements (based on value or risk) with provider systems. And there has been lots of recent developments on both fronts. On the addition of provider capacity, some of our recent coverage includes:
- SeniorBridge is Humana’s Third Service Provider Organization Acquisition in Past 18 Months
- UnitedHealth Buys California Group of 2,300 Doctors
- Inspiris acquired by UnitedHealth Group
On the gainsharing arrangements, the sheer number of partnerships and accountable care organization (ACO) contractual announcements has been fast and furious:
- Aetna Launches 5 ACO Deals In Maine To Serve State Employees
- Humana & Boulder Community Health Agree To ACO Deal
- UnitedHealthcare Plans To Contract With 250 New ACOs In 2015
On the provider system side of this equation, we’re seeing a few different developments. Most notably the increasing number of ACOs that are being formed by provider systems and proactive gainsharing partnerships with health plans:
- Portland InterHospital Physicians Association Forms Accountable Care Organization
- New Accountable Care Organization Launched Called Penn State Health Care Partners
- Seven Wisconsin Health Care Systems Partner Launch ‘abouthealth’ Network
- The Cleveland Clinic Joins The Medicare Shared Savings Program & Launches ACO
To do this, provider systems have needed to invest in new infrastructure to manage population health rather than individual health. And, this infrastructure has been far more expensive than anticipated (see Lessons From An Early Adopter ACO). Not unexpectedly, we’re now seeing larger provider systems consider acquisition of insuring organizations, like the purchase of U.S. Health and Life Insurance Company by Ascension subsidiary, Together Health Network (see Ascension Health Subsidiary, Together Health Network, To Acquire Michigan-Based Insurer). The large financial resources required both for infrastructure and for financial stability to accept contracts pegged less to volume and risk are driving record numbers of mergers and acquisitions in the health care space. Some of the recent transactions we’ve covered include:
- Epic Health Services Acquires Clarity Service Group
- Almost Family, Inc. Set To Acquire WillCare HealthCare
- Acadia Healthcare Acquires Quality Addiction Management
I don’t expect this push to value-based contracting (which is the driver of the “Kaiserification” of the field) to end or even slow down. The last major payer to move in this direction – Medicare – got a major push in this direction in January (see Medicare Bets Big On Pay-For-Value). And, we’ve covered this evolution over the past four years from a number of perspectives – Planning For The New Managed Care, Integration At A Whole New Level, Emerging Insurer-Provider Integration, ‘Diversified’ Insurance Companies, The Vertical HMO Arrives, and Specialist Options In An Integrated Care Management World.
For more on this important conversation, don’t miss a chance for an “inside” look at this industry wide phenomenon from Jeff M. Myers, President and CEO of the Medicaid Health Plans of America, in his keynote address, The Innovations In Medicaid Managed Care Shaping The Current & Future Market, on June 16 at the 2015 OPEN MINDS Strategy & Innovation Institute.