California Hospitals Become Health Insurers

WHAT CHANGES WHEN THE NATION’S HOSPITALS become health insurers? How do pathology practices and clinical laboratories contract to provide lab testing services when their parent hospital is also the insurer?

We are about to learn the answers to these questions by watching California. News outlets are reporting that Sutter Health, one of California’s largest integrated healthcare systems, has filed papers with the California Department of Managed Health Care to notify the agency of its intention to market its own health insurance plan in Sonoma County, beginning in 2015.

This news comes on the heels of an announcement in September by Anthem Blue Cross, a division of WellPoint, about its new health insurance partnership with five California hospitals. The health plan is called Vivity.

Anthem’s partners include such respected hospitals as Cedars-Sinai, UCLA, Good Samaritan Hospital, Huntington Memorial Hospital, MemorialCare Health System, PIH Health, and Torrance Memorial Medical Center. This unique partnership is designed to solve the problems of narrow networks (that often exclude higher-priced hospitals and academic centers) and high patient deductibles for inpatient care. For example, Vivity members will pay co-pays but not deductibles.

The venture will share profits among the partners and one goal is to keep premiums competitive with Kaiser Permanente. The credibility of this new health insurance consortium was affirmed with the news that the California Public Employees’ Retirement System (CALPERS) will offer this health plan to its beneficiaries, effective on January 1, 2015.

All of these developments mean that pathology groups and clinical labs associated with Sutter Health and with the hospitals in Vivity will need to contract differently with their parent organizations. I am betting that it won’t take long for the health plans owned by these hospitals to move their lab providers away from fee-for-service payment and onto other forms of reimbursement.

Moreover, the Sutter and Vivity health plan announcements are just the leading edge of this trend. You can expect to see a hospital/health system- owned health insurance plan coming soon to your own city or town. As that happens, your pathology group or clinical lab should be ready to negotiate reimbursement in arrangements other than fee-for-service.


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