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Why provider-sponsored health plans don't work.
1Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania, USA. burnsl@wharton.upenn.edu
Summary
Integrated delivery systems (IDSs) should partner with existing health plans instead of starting their own. Many provider-health plan integrations fail due to suboptimal conditions and faulty integration, especially in competitive markets.
Area of Science:
- Healthcare Management
- Health Services Research
- Health Economics
Background:
- Integrated delivery systems (IDSs) that directly assume financial risk by establishing their own health plans face significant challenges.
- Many historical successes of provider-plan integrations occurred in rural markets with limited competition and favorable economic conditions, which are rare today.
Purpose of the Study:
- To analyze the factors contributing to the failure of integrated delivery systems (IDSs) that sponsor their own health plans.
- To provide recommendations for IDSs regarding strategic partnerships in the evolving healthcare landscape.
Main Methods:
- Qualitative analysis of factors influencing the success and failure of provider-health plan integrations.
- Review of historical and contemporary market conditions affecting healthcare organizations.
Main Results:
- Provider-health plan integrations often fail due to non-optimal starting conditions or flawed integration processes.
- Limited competition, higher utilization, and greater profit margins in rural areas historically facilitated successful integrations.
- Physician engagement and alignment with system-wide goals can be a challenge for IDSs sponsoring health plans.
Conclusions:
- Integrated delivery systems (IDSs) should carefully evaluate the risks and benefits before launching their own health plans.
- Partnering with established health plans may offer a more viable strategy for IDSs compared to self-sponsorship, mitigating risks associated with market entry and operational complexities.