Hospital systems to form their own insurance company

Piedmont and WellStar, two of Atlanta’s largest hospital systems, said Monday they are forming an insurance company — a bold move in a rapidly changing health care marketplace.

By elbowing their way into the domain of Blue Cross Blue Shield, Aetna and United Healthcare, the hospital systems could dramatically increase the competition in the state’s insurance marketplace. The move could also change the way patients get care, because the hospital systems will have a financial stake in keeping patients healthy and controlling costs.

The impact could be especially significant if the Piedmont-WellStar health plan is included on the health law’s insurance exchange, where many Georgians will shop for plans and qualify for federal subsidies to help pay for their coverage in 2014.

“The reason this is such a big deal is that it creates a considerable amount of competition within the health insurance market in Georgia that many feared would not happen with the exchange — that it would be two or three big insurers, and that’s it,” said Bill Custer, a health care expert at Georgia State University.

Stepping into the complicated world of insurance might seem risky at a time when hospitals are facing financial challenges and waves of change. But the systems are not the first to try it, and they view the undertaking as an exciting opportunity to shift the course of health care for the better.

“I actually think we have more risk by not moving in this direction than we do moving in this direction,” said Dr. Ronnie Brownsworth of Piedmont, who is the CEO of the new health plan. “The trend in this country is for providers to step up and become more accountable for the cost and quality of the care.”

By having access to every detailed piece of information about a patient’s care — from the insurance records to the medical files — the health systems say they have a better chance of achieving the holy grail of health care innovation: dramatically lowering the cost of care by making it better. They say they can do more to prevent hospitalizations and other costly health events if they can study their patients carefully and employ care without the intrusion of insurance company regulations and payment policies.

“We do think it’s a significant advance for the health care market in how care is going to be delivered,” said Greg Hurst, interim chief operating officer at Piedmont.

For privately insured people, health care is a triangle, with patients, hospitals and insurance companies each a fundamental part of the equation. Under the Piedmont-WellStar plan, hospitals would draw a straight line between themselves and patients, cutting insurers out of the game.

And insurance companies are skeptical.

Graham Thompson, a spokesman for large insurers in Georgia, said running an insurance company is especially challenging today with the wave of reforms coming through the federal health law, not to mention managing the day to day operations.

“Can a medical provider successfully assume the role of an insurer?” Thompson said. “There aren’t a lot of great examples out there.”

With health care costs ballooning every year, the government health plans, Medicare and Medicaid, as well as private employers that provide their workers with insurance, are demanding that doctors and hospitals get control of expenses, said Reynold Jennings, WellStar’s CEO. “You can’t succeed unless you have got total information to do that,” he said.

Custer, of Georgia State, said if the Piedmont-WellStar health plan succeeds at better managing the most complex and costly cases, it will put pressure on other insurers to find a way to work with providers to achieve similar results.

The health systems plan to launch an array of products for 2014, the same time that the major components of the Patient Protection and Affordable Care Act kick in. The systems said that they want to offer a Medicare Advantage plan, as well as plans for employers, but the details aren’t yet clear. The systems said the plan would be available for Piedmont and WellStar’s employees and family members.

Whether it will offer a plan on the insurance exchange required by the health law will depend on the detailed requirements of selling on the exchange, executives said.

The state Department of Insurance confirmed Monday that Piedmont has already filed an application — for a health maintenance organization. Piedmont and WellStar said they intend to move forward as a joint venture operating a for-profit insurance company. Piedmont said it started working toward developing an insurance plan this year when it partnered with Evolent Health, a Washington, D.C. which helped the University of Pittsburgh Medical Center launch a plan that the systems hope to emulate.

The plans are expected to operate as an HMO where patients are treated mostly within Piedmont and WellStar’s vast network of hospitals and doctors. But the systems said they may expand that network to include other providers.

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