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Hospitals consider becoming insurers too
9/7/2012
 
Nearly 20% of hospital networks in the country are marketing an insurance product to employers, and another 20% or so are exploring the option, reports Kaiser Health News.

"This is a huge, dramatic cultural shift," says Michael Dowling, president and chief executive of North Shore-LIJ, one of New York's largest hospital networks. The organization is laying the groundwork to become an insurer, while also providing health care.

As an insurer, the system will devote more resources to preventive care. "The last place I'll want you to be is in the hospital. I'll be doing everything to get you to take care of yourself," Mr. Dowling commented to Kaiser.

Like other hospital chains across the country, the network is under intense pressure from public and private insurers, as well as employers, to accept flat-rate payments for care rather than reimbursements for every service. “And that puts pressure on hospitals not just to manage costs, but to keep people well – in short, to act more like insurers,” Kaiser Health News says.

Consumers would likely benefit from streamlined care and possibly lower costs, but some worry that as insurers, hospitals might be tempted to withhold care. "The question is how it plays out. Are doctors given the freedom to make recommendations outside of cost calculations?" asks Carmen Balber, who directs the Washington office of Consumer Watchdog.

Some observers say if hospitals are to be paid a flat fee for managing care, and expected to bear the financial risk, why do we need insurance companies? Others note that it is not clear if consumers will go along with the new payment system because it seems too much like managed care of the 1980s.

"Hospitals think this is a way to cut out the middle person, tailor care more closely and save a lot of extra money, but there's a history to this and it generally doesn't work. It winds up being incredibly complicated,” Howard Berliner, a visiting professor of health policy at New York University, noted to Kaiser.

For one, in order to become licensed as an insurer a health system must have millions of dollars in capital reserves and must run a regulatory gauntlet to prove it has an adequate provider network and can deliver required benefits. The hospital system cannot dip into the health plan's reserves to fund new services.

“The transition is complex and fraught with risk for hospitals, experts say. Insurance is a different business from health care and requires its own mind-set and skills. Hospitals will have to change the way they are run and radically alter the way they take care of patients, possibly taking on powerful interests – such as doctors,” Kaiser added.