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Health systems can effectively eliminate their reliance on third-party insurance companies by creating their own health plan.265 This will allow systems to provide necessary care and simultaneously control the financing of that care, creating a more efficient, and better-quality delivery of health care.266 Overall, hospital-provided health plans produce higher quality ratings by consumers.267 By offering a narrow network to policyholders of their provider-owned health plans, health systems can maximize and estimate their patient volume more accurately and efficiently.268 In creating their own health plans, systems also have the potential to generate more revenue that can be reinvested in hospital infrastructure and within the community.269 For example, Pennsylvania’s Geisinger Health System receives $1.3 billion in revenue from operating Geisinger Health Plan.270 Increased revenue can also allow health systems to “re-engineer [their] care to get better outcomes.”271 Healthcare providers have the potential to increase clinical coordination by aligning the incentives between the deliverers and the financers of health care.272 Under coordinated care models, the traditional contracted relationship between insurers and providers will be based on “data, care management, and analytics,” rather than the flawed negotiation system based
265. Herman, The Risks, supra note 257. 266. Id. The CEO of Premier Health Plan, a provider-sponsored health plan, stated: “For us, the insurance business is just a vehicle to cover as many lives as we can in our service area with our population health initiatives.” Herman, More Health Systems, supra note 258. 267. Austin Frakt, When Hospital Systems Buy Health Insurers, INCIDENTAL ECONOMIST (May 27, 2014, 6:00 AM), http://theincidentaleconomist.com/wordpress/upshot-vertical- integration/.; cf., Ellison, supra note 172 (noting a study that found that seventy percent of the increased premiums derived from health systems operating health insurers did not result in higher quality of care). 268. Gunjan Khanna et al., Provider-Led Health Plans: The Next Frontier – or the 1990s All Over Again?, MCKINSEY & CO. 1, 1 (2015), http://healthcare.mckinsey.com/sites/default/ files/Provider-led%20health%20plans.pdf. 269. Herman, The Risks, supra note 257. Costs of incremental health care are often less for providers as compared to payors. VALENCE HEALTH White Paper, supra note 240, at 2. For example, an episode of care might cost a traditional insurer $50,000. However, a health system sustains out-of-pocket costs that are limited to the variable costs associated with providing care. In many instances, the variable cost of care often is less than – percent of the total amount billed to an insurer. Id. Provider-sponsored health plans have an opportunity to generate non-profit revenue that can be reinvested directly into the health system. Rick Bobos, Is a Provider-Sponsored Health Plan Right For You?, VALENCE HEALTH (Mar. 20, 2014), http://hfmaky.org/downloads/ valence_health_is_a_provider_sponsored_health_plan_right_for_you.pdf. 270. Herman, The Risks, supra note 257. 271. Id. 272. Kamp, supra note 254.