The number of nonprofit hospitals entering the health insurance business will continue to rise in the coming years to gain market share or reduce costs through improved healthcare management, according to a recent report by Moody's Investors Service.
Creating a new plan or acquiring an existing one carries several risks, including harming cash flow margins, a shift in new managerial skills and intense competition. Nevertheless, the trend is expected to persist, particularly among larger systems that can absorb the costs.
Key drivers of the trend include the Affordable Care Act, which encourages care coordination; continued focus on cost reductions; synergies through greater economies of scale; and creating new revenue streams, according to Moody's.
Although some nonprofit hospitals have successfully managed long-standing health insurance plans, they often have ample cash reserves to face insurance cycles and regulatory changes in the insurance business.