The concept of health systems successfully operating a health plan while coexisting with physicians in an integrated delivery model has been an alluring proposition in our industry for decades. The goal is for integrated systems to be purveyors of population health and assume risk while delivering excellent clinical care.
In reality, the model is strenuous and complex but not impossible. True alignment requires a commitment to cultural transformation. Common strategic, clinical and operational goals must be agreed upon. Sufficient infrastructure is also needed to manage data and accurately calculate financial risk.
Notwithstanding the challenges, the benefit of combining a health plan and provider under the same organization is the ability to foster and support innovations for improving access to care.
The value proposition
Sentara Healthcare initiated our health plan in 1984. Our health plan division for years reflected approximately 20-30 percent of Sentara's overall business. It was not a core focus of our strategy. When I took over as CEO in 2016, two factors led me to reconsider that. The first was the growth opportunity in the overall health plan market. The second was a need to make our health plan more competitive by scaling up our operations.
Sentara's health plan business is now 50 percent of our operations. It generates $4.5 billion in premium revenue and covers over 900,000 members. Sentara runs two health plans, Optima Health Plan and Virginia Premier Health Plan. Our operations will grow with our planned integration with Greensboro, N.C.-based Cone Health's 15,000-member Medicare Advantage health plan.
Combined health plan-provider operations allow for many advantages, including enhanced population health management and more robust data analytics. The health plan offers a broad look at the delivery model, while our clinical staff bring deep information on what is going on at the hospital level. Especially during the pandemic, our health plan operation has helped buffer the overall impact of decreases in elective procedures. But the hard truth is provider-owned health plans are rarely an immediate success. The cultural, financial and operational changes required to make them work are arduous.
The issue of alignment
Misalignment is built into how health plans and providers operate. Services that drive revenue for a hospital or doctor typically are expenses for the health plan. What cuts expenses for a health plan often lowers revenue for a hospital.
Historically, health plans have always been cost-conscious. They are focused on setting a premium, delivering a set of defined services to members, and managing assumed risk. Separately, providers have focused on getting patients the clinical care they need, with cost being a concern but secondary to quality. Many providers fear that paying too much attention to cost may compromise their primary concern for their patients.
Today, health plans and providers are becoming acutely aware that society does not have unending resources to spend on healthcare. Providers understand that patients want the right care in the right place at the right time, and that equation has to include a sensitivity to cost.
This environment has strengthened a key area of agreement and alignment between health plans and providers: high quality care must be provided at a reasonable cost. Within that agreement is a need to create access to care for all demographics. Ensuring care is affordable and equitable is a critical issue in our society. It requires collaboration between the health plan, which has rich population data, and the practitioners who can use that information to deliver targeted, individualized care across the continuum and better ensure health equity.
Key takeaways for systems considering an integrated model
For healthcare executives who are contemplating an integration of their provider business with a health plan, there are three key learnings from our experience.
1. Skilled, first-class leaders are non-negotiable. We built a nationally experienced executive team to lead our health plan business. Equally, the provider side requires top talent. Strong physician leaders that understand the complex environment of risk and care alignment within an integrated delivery system is a must.
2. You cannot run a health plan, even in an integrated space, like it is part of a hospital. You have to allow it to run like a health plan. There is a tendency to think a provider-owned health plan is going to be subject to provider rules. Some physicians of integrated health systems may expect their health plan to be deferential to the provider entity. This is not reality. A health plan has to play by the rules of its competitors in the health plan market.
3. Leaders need patience, perseverance, and lots of it. A provider organizational model that starts up a health plan will likely not immediately work. It takes several years before your model will stabilize. Leaders must realize most integrated health systems that created insurance plans in the 1970s and 1980s lost money and learned hard lessons. While the financial environment may have been more forgiving at the time, it is not the case today. At Sentara, it took us 15 years before our health plan was able to successfully compete in the market. It is not a short-term game.