United States: Blurring The Line Between Health Care Provider And Payor

Since the passage of the Affordable Care Act, health care providers in markets around the country have started exploring the payor side of the business by sponsoring health plans. As the future of the ACA and insurance exchanges becomes more uncertain, it remains to be seen how this trend will play out. This article discusses some of the factors giving rise to the phenomenon of providers becoming payors. It also explores what this trend might (and might not) mean for health insurance exchanges, smaller providers and the insurance markets generally.

Often, a provider-sponsored health plan starts with the provider offering health coverage to its own employees and those of its affiliates — for instance, employees of a health system or university. This approach enables the provider to become more adept at managing population health, because, as the provider begins to take on financial risk in addition to providing care, it develops the financial incentive to provide that care as efficiently as possible. The provider typically hires a third-party administrator to process and adjudicate claims under its plan, enabling it to continue to focus its internal efforts and resources on the care side of the equation. So, in effect, the provider continues to function as a provider, but because it has also taken on a risk-bearing, payment role, it gains the incentive to make its models of care delivery more cost-efficient and quality-driven.

Sometimes a provider-sponsored health plan stops there, but on other occasions, after offering coverage to its own employees, it expands further. For instance, it may begin to offer coverage through other, unaffiliated employers, or it may set up a Medicare Advantage plan to provide care, on a risk-bearing basis, to the Medicare population.

Providers may have different motivations for pursuing these options. Sometimes, as noted above, they see the provider-sponsored health plan as a sound initial step toward wider-scale population health management or value-based health care efforts. On other occasions, the move is more reactive. For example, as the insurance market in a particular region becomes more concentrated in the hands of a small number of insurers, the remaining providers may worry about the risk of being "squeezed out" of an increasingly concentrated market. That concern may lead some providers to jump into the payor market preemptively. For similar reasons, payors may seek to collaborate with, or acquire control of, providers.

The shift towards provider-sponsored health plans, perhaps like other elements of the move towards value-based health care, appears to be more apparent among large, sophisticated health systems. A recent Ernst & Young report assessed the progress in the march toward value-based health care of various U.S.-based health care providers with annual revenues of at least $100 million.1

Notably, the report found that only 1 percent of the smallest-revenue hospitals polled (those with $100 million to $499 million in revenue) were involved in provider-sponsored health plans. For hospitals in the next revenue category ($500 million to $999 million), the number was 6 percent. This pattern continued through all of the revenue categories studied, with 11 percent of organizations with revenue of $1 billion to $2.49 billion, 17 percent of those with revenue of $2.5 billion to $4.99 billion, and 19 percent of the largest-revenue organizations being involved in provider-sponsored health plans.2 The report found a similar pattern for other signs of the uptake of value-based health care, such as how many hospitals have at least one value-based reimbursement initiative, participate in bundled payment model initiatives, or are involved in alternative payment models.3 This is a significant trend, and one that raises important questions for the long-term competitiveness of smaller provider organizations.

As Congress finds itself in the midst of weighing, once again, whether and how to repeal or scale back the ACA, a number of financial and other uncertainties have emerged for providers. Hospitals generally worry about the number of people who will lose their insurance coverage; this could happen because people lose their coverage generally, or because insurers cease covering pre-existing conditions, or for a combination of these reasons. This possible increase in uninsured patient populations, and the accompanying rise in so-called bad debt, is a real concern for hospitals. Hospitals and providers also worry about insurers reducing their payments to them over time, in an effort to remain solvent.

It is unclear whether the rise of provider-sponsored health plans could actually combat these uncertainties faced by provider institutions. A health plan would be better placed to ward off these financial concerns by increasing the number of people in the market to whom it provides individual coverage. But this is unlikely to happen, because individual coverage is a risky undertaking from a payor's point of view.

In a similar vein, a health plan could benefit from boosting the number of low-income people to whom it provides coverage, but again, this is difficult to achieve, because low-income populations generally are obtaining their insurance coverage through the exchanges. A provider-sponsored health plan might be able to make some headway by focusing on chronic diseases, providing coverage to patients who are heavy users of high-cost services, and working to make its care for those patients more cost-efficient by using care managers. Again, though, without the government subsidizing insurance for the chronic disease population, the rate of uptake may not be high enough.

Moreover, as the above discussion makes clear, larger provider networks seem to be better placed to jump into the world of sponsored health plans than smaller providers are. For smaller providers, which are arguably already more vulnerable to the risks of rising bad debt and diminishing insurance payments, the foray into sponsored health plans may be a much less plausible option than for their larger counterparts. Thus, those organizations most affected by these uncertainties may be less able to extricate themselves from them.

It is also unclear whether the growth in provider-sponsored health plans could strengthen the insurance exchange markets more generally. Arguably, it is difficult for any one newcomer to an exchange to have a significant impact. On the other hand, any new entrant into a market from which other insurers are fleeing likely stands to improve consumer choice and thus strengthen the market. A newcomer with name recognition, such as a health plan run by a highly regarded local or regional health care institution, may have particular success in this regard. Here, too, smaller providers may face a disadvantage.

Footnotes

1. "Value-driven care. Are you ready? Insights drawn from EY Health Advisory Survey 2017," 2017, available at http://valuedrivencare.ey.com/bmc/.

2. Ibid. at 3.

3. Ibid.

Originally published by Law360 on September 20, 2017.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Drinker Biddle & Reath LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Drinker Biddle & Reath LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions