On the whole, PSHPs are better able than larger organizations to be nimble. Their ability to operate with a very narrow margin can help them grow membership through highly competitive premiums. Smart partnerships can expand their presence in a given region. PSHPs also have more opportunities to collaborate with their physicians—establishing good-faith relationships that can promote engagement.
PSHPs can't be all things to everyone, but they can be the best at what they do. And in an increasingly consumer-centric world, they can be poised to thrive.
In our continuing interview series on what it takes for PSHPs to succeed, ECG's Joe Mangrum and Christopher Costa explain how these plans can be regional leaders despite operating in the shadow of national plans.
What strategies should provider-sponsored health plans use to grow membership while maintaining financial stability?
Joe: I think there are three strategies. First, you need targeted growth. We see this time and time again—the most successful provider-sponsored health plans grow in markets where they already have care delivery scale. They steer members to their own facilities and then manage the cost of care.
Second, they need to build smart partnerships, such as direct-to-employer contracts and Medicaid subcontracts that can give them access to the membership without taking on excessive risk.
Third, they need to be really disciplined with underwriting and financial oversight. As we’ve talked about previously, the leaders of these plans often come from the provider side. You need to have somebody with a payer mindset overseeing underwriting and the financials of the plan.
Chris: The provider sponsor and the health plan need to align on the concept of value. Compared to the public plans, provider-sponsored health plans don't have the fiduciary responsibility to maximize returns to shareholders. In other words, they can get away with a very narrow margin. It still has to be positive—you want a sustainable business—but it can be somewhere between 0% and 1% and they can drive that additional return into the premiums of their products. And so provider-sponsored plans can grow membership through highly competitive premiums, and the value that's being realized is the volume they’re able to drive to the health system because of the growth in the health plan.
How do provider-sponsored health plans ensure provider alignment when implementing risk-based contracts that require both the health plan and the provider network to share financial accountability?
Joe: We always come back to shared data. What we often see with the national insurers is that they have great data and maybe the providers don't, or vice versa. It’s got to be great data on both sides, and it has to be freely shared.
They also need real-time data. We've seen a lot of provider-sponsored plans that have really robust dashboards and care gap alerts, but they're retroactive; they need real-time dashboards.
Also, governance matters. When we've worked with providers that are dealing with larger or national payers, they often don't feel like they have a seat at the table. And that's easy to do at a provider-sponsored health plan—give physicians a seat at the table. When they can be involved in the decision-making about the network and policies and quality goals, they're more willing to engage in value-based or performance-based models, which can be hugely beneficial for the plan.
Chris: And agreeing on which quality metrics are included is really important. Instead of a top-down approach where payers are saying "these are the metrics we care about," we see a lot more success in risk-based contracts when the providers and payers work together to determine which metrics really matter. That alignment can promote a good-faith relationship between the two entities and also can improve care coordination and quality. And that's really achieving the goal of risk-based care—minimizing waste, minimizing unnecessary services, and sharing in the savings.
How can provider-sponsored health plans evolve over the next decade to stay competitive in industry increasingly dominated by mega payers and vertically integrated systems?
Chris: With the introduction of remote work, even smaller employers can have employees across the country. So a company looking to have health benefits for employees on either side of the US is most likely going to go with a national health plan that has a nationwide network.
That means provider-sponsored health plans have two choices.
One is to partner with other provider-sponsored health plans or regional health plans to get a wider geographic network and/or working with some of these rental networks to so they can price their products more competitively across the country.
Or the provider-sponsored health plans can focus on lines of business, such as Exchange, Managed Medicaid, and Medicare Advantage, that are more regionally oriented and limited to the areas they serve. And I don't think those options are mutually exclusive.
Joe: I think that the provider-sponsored health plans should focus on being the best in the market for the populations they serve. Chris mentioned Medicaid as an example—they could become the regional leader in duals or special needs plans or employer-based population health. They should focus on getting really good in a given area and not try to be everything to everyone, because they just don't have the resources to do it.
I also want to echo what Chris said about partnerships. Beyond partnering with regional health plans, we’ve seen plans be successful partnering with smaller or regional pharmacy benefit managers (PBMs). There are also a lot of great behavioral health vendors that are blazing trails, and I think that can be a great partnership for these regional provider-sponsored health plans.
Can technology help PSHPs compete with larger plans? Or, beyond technology, what other ways can PSHPs be innovative?
Joe: I'll offer two tactical suggestions. First: upgrade your technology stack more than once a decade. Try at least once a year to look at your data platforms, care management tools, and CRM systems. Because more and more, we're seeing members becoming such consumers in the traditional sense. They shop around and they talk to their friends and family, and if friends are at a national plan that has really great technology, great customer service, and online dashboards, they might think "oh, maybe I want to go over there." But if the regional provider-sponsored health plan has something close to it, then it can compete.
And my second tactical recommendation is to embrace continuous innovation. Test new care models, virtual offerings, and new member engagement strategies every year. The great part about being a smaller plan is that you're more agile, more nimble. You can do this type of stuff. You don't have all the bureaucracy of a large plan that’s slow to change. There's a benefit to it, and you can be competitive that way.
Chris: It's worth making the case to the provider sponsor that technology investments will benefit their members. We always encourage our clients to make that case to the health system: "Here are the ways that we can innovate. We're willing to collaborate if you want to support us in these efforts."
