Healthcare News & Insights

How will hospitals benefit from provider-insurer mergers?

Health system mergers are becoming more common — some systems are even acquiring health insurers so they can offer patients their own health plans. But what effects come with a hospital-insurer merger? 

Details are still sparse but, according to ModernHealthcare, Ascension, the not-for-profit health system, looks to be in talks to acquire a yet-to-be-named insurance company.

The acquisition would allow Ascension to offer health plans directly to the patients of its 101 hospitals.

Robert Henkel, Ascension’s president and CEO, explained during a conference that the potential merger is part of a strategy that would let the system take on more financial risk for contracts with employers and other insurers.

And Ascension isn’t the only health system trying to throw its hat in the insurance ring. But what sort of changes or improvements, if any, come with a joint hospital-insurer venture?

Making sense of the mergers

The idea of a healthcare provider joining forces with a health insurer may seem a little counter-intuitive. After all, many physicians know that getting the payment they feel they deserve from payors  isn’t always a simple or amicable process. But as Austin Frakt of the New York Times explains, there are still plenty of reasons for the two businesses to team up, beyond handling contracts. For example:

  • A collaboration or merger with an insurer could allow an organization to develop more effective incentives to achieve higher-quality care.
  • Pulling resources, and combining human resource and IT departments could help reduce administrative costs, and
  • A provider-insurer combination might have an advantage in adapting to and benefiting from new Medicare payment models emerging due to the Affordable Care Act.

The concept of provider-insurers is still new, so it’s hard to know exactly what sort of effects the mergers will have on the industry or patients.

Frakt conducted research with two university professors and published a study last year on what effects  provider-insurer integration would have on premiums and care-quality. He found that plans offered by provider-insurers were higher than average.

Despite being more expensive, patients still rated those plans as having a higher quality than other insurers. Why that’s the case is unclear, though.

Frakt also found that 70% of the additional premium wasn’t attributable to higher care-quality, and that integration didn’t result in more generous health plan benefits.

Frakt notes that these mergers still could give organizations a significant advantage over competitors, but also may push typical health system competitors out of the market, leading to even higher premiums. There may be a chance that these mergers become targets for anti-trust regulators that want to preserve competition for the sake of consumers.

In fact, it seems pretty likely that provider-insurers will be a target for many government regulators already concerned with preventing insurance fraud and improving care-quality for patients. However, that may only happen after more data comes in and additional research is conducted, since Frakt’s is currently the only study to address the issue.

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