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incentivized to keep hospital beds full. However, when the provider also takes on the role of insurer, these traditionally-contrasting goals are aligned to one coordinated goal of keeping the patient-member healthy and costs low.257 Health systems, however, do not want to replicate the financial losses that occurred in the 1990s.258 Providers are thus cautiously examining the options and slowly approaching the new provider-owned health plans.259 Although leaders of provider-owned health plans say the implementation of these plans is “a long slog to positive margins,” health systems can initially seek partnerships with insurers.260 Moreover, health systems can hire internally or utilize third-party administrators to initially aid in their financial risk management.261 If health systems seek to compete with traditional health plans on the market, they will be required to effectively manage risk in order to get a share of the dollars.262 Hiring an in-house insurance team may not be the most viable option for a health system initially. To understand and better manage the risk that a health system will incur by operating as an insurance company, the system may contract with a health plan management company.263 To combat the initial difficulties associated with operating a health plan, providers may employ consulting firms to aid and advise the operation of their new health plans.264
257. Bob Herman, The Risks of Provider-Operated Health Plans: Are the Rewards Worthwhile?, BECKER’S HOSP. REV. (Jan. 31, 2014), http://www.beckershospitalreview. com/payer-issues/the-risks-of-provider-operated-health-plans-are-the-rewards- worthwhile.html [Herman, The Risks]. 258. Bob Herman, More Health Systems Launch Insurance Plans Despite Caveats, MODERN HEALTHCARE (Apr. 4, 2015), http://www.modernhealthcare.com/article/20150404/ magazine/304049981 [hereinafter Herman, More Health Systems]. 259. Id. 260. Id. However, health insurance companies may not wait to aid competing provider networks gain traction in the insurance market. Id. 261. Molly Gamble, Health Systems Becoming Payers: 8 Observations, BECKER’S HOSP. REV. (July 8, 2014), http://www.beckershospitalreview.com/finance/health-systems- becoming-payers-8-observations.html; see Herman, More Health Systems, supra note 258 (noting one CEO of a large health system stated, “We are going to do our insurance products through established health plans”). Newly-formed provider-owned health plans may need the help of third party insurance administrators to manage the possible sicker population that may find the health system’s narrow network, low premium attractive. Id.; see also supra Part I.C. 262. Burns, supra note 245. 263. Id. Partnering with national insurers is a viable option for health systems entering into the insurance game. Herman, More Health Systems, supra note 258. To gain expertise within the market without assuming total patient risk, one safe option for provider health systems seeking to enter into the insurance market is to offer the initial health plans to a narrow population, such as a Medicare Advantage plan. Id. 264. Herman, More Health Systems, supra note 258.
