Insights

The Great Health Market Buy-In

May 29, 2014

Property & Casualty

Health system strategy in the post-ACA world = Be like Kaiser! I guess that large health systems figure that the most direct way to “share savings”, as the myriad bundled payment schemes promise, is to own the company! However, it is important to keep in mind that by doing so you also share the financial risk and open an entirely new level of liability (as the 3rd party payor “bad guy” is no longer around to be the deepest of the deep pockets in the liability chain). A recent article in Modern Healthcare revealed that not only Ascension, but also CHI, Sutter and Scripps are all planning to increase their participation in the “provider direct to employer” market.

This morning, a follow-up article was published. According to Modern Healthcare, “WellCare Health Plans or Centene Corp. are the most likely insurance acquisition targets for Ascension Health.”

Wow, they were serious when they said they want to get into the Health Plan market! These are large targets for a “non-profit, Catholic health system,” even a large one like Ascension with 100+ hospitals. Wellcare and Centene have revenues of roughly $10B and $11B respectively, and are both for-profit, public corporations. At a time when a consistent theme in the healthcare industry headlines is the questioning of the not-for-profit status of certain health systems, it appears that some are ready to act on the “loudly whispered” notion that the largest non-profit health systems are just fine to let their status go if it gives them the freedom to operate, and removes a least one–albeit small–source of regulatory risk from questioning their tax position and “Charity Care.”

Finally, speaking of regulatory risk, my sense is that these providers have largely underestimated the extent of regulatory risk that they will be taking on through these new arrangements, primarily from antitrust allegations in markets where they will no doubt be seeking to further narrow the networks.

Stay tuned.

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All views expressed in this article are the author’s own and do not necessarily represent the position of Woodruff-Sawyer & Co.

Chad Follmer

Senior Vice President, Healthcare and Life Science Practices

Contributor, Property & Casualty

Chad leads the Healthcare Practice at Woodruff Sawyer. His expertise in the healthcare and medical industry includes regulatory risk, data privacy and cyber risks, alternative risk finance structures (captives, RRGs, SIRs and trusts) and risk solutions for ACOs and all forms of coordinate care structures. Chad is a Risk and Insurance Magazine “Power Broker” award recipient, and authors blog features on timely healthcare topics. 

415.399.6384

LinkedIn

Chad Follmer

Senior Vice President, Healthcare and Life Science Practices

Contributor, Property & Casualty

Chad leads the Healthcare Practice at Woodruff Sawyer. His expertise in the healthcare and medical industry includes regulatory risk, data privacy and cyber risks, alternative risk finance structures (captives, RRGs, SIRs and trusts) and risk solutions for ACOs and all forms of coordinate care structures. Chad is a Risk and Insurance Magazine “Power Broker” award recipient, and authors blog features on timely healthcare topics. 

415.399.6384

LinkedIn