Today's Provider-Sponsored Health Plans: What Boards Need to Know

By Phil Kamp and R. Todd Stockard

With the recent rounds of health insurance company merger and acquisition activity, many hospital executives and their boards may be wondering if a provider-owned plan might make sense for them. There certainly will be some who observe that provider-sponsored health plans (PSHPs) are not new. Others may say, “This sounds a lot like what we tried and failed to do with health maintenance organizations (HMOs) in the 1990s.” While all of these observations are true, the health care environment has changed dramatically over the past 25 years.

Today there is more interest in value based care than ever before. The U.S. health care system is increasingly tying reimbursement to quality, an important difference from what was happening in the 1990s. HMOs of the past eventually fell out of favor largely because they limited use of health care services through “gatekeeper” approaches. In contrast, today’s provider-sponsored health plans are not focused on imposing across-the-board limitations on service utilization. Instead, the focus is on preventive care and on identifying and encouraging access to the most effective interventions for a given condition, while discouraging access to the least effective interventions. The PSHPs we have worked with usually build their plans around smaller, more limited networks of providers, so they can more closely coordinate care within and across those networks. Understanding how successful provider-owned plans have evolved since the 1990s can help ensure that boards are best prepared to contribute to key strategic decisions about starting a PSHP.

To