The Provider-Sponsored and Provider-Owned Health Plan Market: Opportunities and Challenges
The Growing Role of Provider-Sponsored and Provider-Owned Health Plans (PSHPs)
The healthcare landscape is rapidly evolving, with a growing shift towards value-based care and integrated health systems. As a result, the Provider-Sponsored or Provider-Owned Health Plan (PSHP) market has emerged as a key player in the broader health insurance ecosystem. Unlike traditional health plans, which operate as intermediaries between patients and providers, PSHPs are directly owned and operated by healthcare providers, such as hospitals or physician groups. This model enables healthcare systems to integrate care delivery and financing, allowing for better care coordination, improved patient outcomes, and more efficient cost management.
This paper will examine the PSHP market by market segment, explore the trends that are unique to these plans, assess their performance relative to traditional health insurers across different lines of business (Medicare Advantage, Medicaid, ACA, and commercial) and outline their key priorities for the next five years. We will also explore the critical role Alvarez and Marsal (A&M) can play in supporting the success of PSHPs during this period of growth and transformation.
Key Players in the PSHP Market by Market Segment
The PSHP market consists of a wide range of players, each with different capabilities, market strategies and operational models. The market can be segmented into large, mid-market, and small players, each with distinct characteristics and challenges.
1. Large Players
These players are typically large integrated healthcare systems that operate in multiple regions and have substantial resources. They have established capabilities in both healthcare delivery and insurance, enabling them to effectively manage large volumes of lives and leverage economies of scale. Some of the largest PSHPs include:
- Kaiser Permanente (West Coast)
- Intermountain Healthcare (Mountain Region)
- Ascension Health (Midwest/Southeast)
- Partners HealthCare (Northeast)
Key Characteristics:
- Significant scale with large provider networks.
- Strong integration of healthcare delivery and insurance operations.
- Investment in advanced technologies, such as data analytics and AI, for improved care coordination and cost management.
- Expertise in managing Medicare Advantage and Medicaid populations.
2. Mid-Market Players
Mid-market PSHPs typically operate in regional or state-based markets and often focus on a specific line of business or population segment. These players may be hospitals or healthcare systems that are expanding their footprint in the insurance space but lack the nationwide reach or resources of the largest players. Examples include:
- Baptist Health Plan (Southeast)
- Sharp Health Plan (California)
- Health Partners (Midwest)
Key Characteristics:
- Regional focus with a more localized network of providers.
- Strong emphasis on Medicaid and Medicare Advantage plans.
- Investment in care models such as patient-centered medical homes (PSMH) and accountable care organizations (ACOs).
- Greater flexibility but fewer resources than larger players.
3. Small Players
Small PSHPs are generally smaller, more nimble players that may operate in limited geographic areas or target specific populations. These players often come from independent provider groups, specialty providers, or smaller health systems. They may also partner with larger organizations for certain administrative functions but remain focused on niche markets. Examples include:
- OneHealth (California)
- Family Health Network (Ohio)
Key Characteristics:
- Limited geographic or market focus.
- Emphasis on specific population health, such as Medicaid or low-income ACA populations.
- Strong focus on personalized care and patient engagement, often leveraging telemedicine and care coordination services.
- Cost-conscious, often relying on technology solutions to keep administrative costs low.
Unique Market Trends for PSHPs
PSHPs are shaped by several market trends that are unique to their model, compared to traditional health insurers.
1. Integration of Care and Insurance
A key feature of PSHPs is their ability to integrate care delivery and financing. This model enables providers to have greater control over both the quality of care and the cost of care. By managing both the clinical and insurance aspects of healthcare, PSHPs are better equipped to address inefficiencies in the system, improve care coordination, and reduce unnecessary medical interventions.
2. Value-Based Care
PSHPs are leaders in value-based care models, where providers are financially incentivized to improve patient outcomes while reducing costs. This model rewards providers for better managing care across the continuum, focusing on preventive services, chronic disease management, and outpatient care to avoid costly hospitalizations.
3. Social Determinants of Health (SDOH)
Addressing social determinants of health (e.g., housing, food security, transportation) has become a major focus for PSHPs. Their ability to directly interact with patients and provide more comprehensive care allows them to incorporate non-medical interventions that can improve health outcomes and reduce healthcare costs. Many PSHPs offer prepaid cards for essential services such as food, housing, and transportation to better manage these factors.
4. Technological Investment
PSHPs are increasingly investing in technology to drive operational efficiency, improve care coordination and reduce costs. Investments in data analytics, telemedicine and AI are key to improving clinical outcomes, predicting patient risks and reducing hospital readmissions.
5. Regulatory Shifts and Compliance
With the ongoing changes in healthcare policy, including changes to Medicare Advantage and Medicaid, PSHPs must stay agile and responsive to regulatory shifts. Adapting to these changes while maintaining compliance will be critical for their success in the coming years.
Performance Relative to Traditional Health Plans by Line of Business
The performance of PSHPs relative to traditional health plans varies across different lines of business (LOB).
1. Medicare Advantage (MA)
PSHPs tend to outperform traditional health plans in the Medicare Advantage space, largely due to their ability to directly coordinate care for the elderly population. By focusing on chronic disease management, preventive care, and care coordination, PSHPs often achieve better clinical outcomes and higher Star Ratings for MA plans. Their integrated model also results in cost savings and improved member satisfaction.
2. Medicaid
In the Medicaid market, PSHPs can leverage their deep understanding of the social and medical needs of low-income populations. They often outperform traditional plans by offering more personalized care and better managing complex cases. PSHPs that focus on Medicaid managed care can use their provider networks to ensure smoother transitions between healthcare services and community support.
3. ACA Marketplace
For ACA marketplace plans, PSHPs face a more competitive landscape, as many traditional insurers dominate this space. However, PSHPs can differentiate themselves by offering value-added services like telemedicine, mental health support, and improved care management. The challenge for PSHPs is scaling their operations to meet the administrative demands of the marketplace while maintaining the benefits of their integrated care model.
4. Commercial Plans
Commercial plans are often less of a focus for PSHPs, as they tend to specialize in public health programs like Medicaid and Medicare. However, larger PSHPs are beginning to enter the commercial market, leveraging their integrated care models to reduce costs and improve care outcomes. Their success in commercial lines depends on their ability to scale and offer competitive premiums while maintaining high-quality care.
Top Priorities for PSHPs in the Next Five Years
PSHPs will focus on several key priorities over the next five years as they continue to expand and mature:
1. Expanding Value-Based Care Models
The shift from fee-for-service to value-based care will remain a top priority. PSHPs will continue to expand risk-based contracts, improve care coordination, and invest in population health management strategies to better manage chronic conditions and prevent hospital readmissions.
2. Scaling Operations and Technology
As PSHPs grow, they will need to focus on scaling their operations efficiently while maintaining high standards of care. Investment in technology, including data analytics, AI and health IT infrastructure will be critical to managing care more effectively and controlling costs.
3. Addressing Social Determinants of Health
PSHPs will continue to innovate by incorporating social determinants of health into their care models. This will include offering non-medical benefits like transportation, housing support and nutrition assistance to ensure that patients’ health is not solely dependent on medical treatment.
4. Enhancing Member Experience
Improving the patient experience will be critical as PSHPs expand their member base. Personalization, better access to care, and a seamless experience between insurance and care delivery will be key focus areas. Patient engagement tools, including digital health and telehealth will play a significant role.
5. Navigating Regulatory Changes
With ongoing policy changes related to Medicare, Medicaid, and ACA, PSHPs will need to stay nimble and compliant with regulations. Their ability to adapt to changes while maintaining a profitable and efficient model will determine their long-term success.
Conclusion
The PSHP market is diverse, with a broad range of players operating in different geographic regions, each with unique strengths. Large PSHPs benefit from scale, integration, and access to advanced technologies, while mid-market and small PSHPs capitalize on their agility, deep community engagement, and personalized care models. Regardless of size, PSHPs are increasingly focused on delivering value-based care, improving patient outcomes, and addressing the social determinants of health.
The PSHP market is poised for continued growth and transformation as the healthcare industry moves toward integrated care models, value-based reimbursement and a focus on social determinants of health. With increasing regulatory pressure and rising consumer expectations, PSHPs must focus on scalability, technological innovation, and patient-centered care. Alvarez and Marsal (A&M) can play a crucial role in supporting PSHPs as they navigate these challenges and work toward a more sustainable, efficient and patient-centered healthcare system.
How A&M Can Support PSHPs
There are several areas where A&M adds significant value:
- Strategy Development: A&M can help PSHPs develop growth strategies, whether it’s expanding into new markets, scaling operations, or improving care delivery models.
- Operational Optimization: A&M assists PSHPs in streamlining operations, enhancing administrative efficiency, and implementing best practices in care delivery.
- Regulatory Compliance and Risk Management: A&M has significant expertise in healthcare policy and can assist PSHPs in managing regulatory compliance and navigating changes in Medicare, Medicaid, and ACA rules.
- Technology Integration: We have deep, operational expertise in healthcare IT and can help PSHPs leverage data analytics, AI and digital health technologies to improve care coordination and enhance patient outcomes.
- Mergers and Acquisitions: As PSHPs look to grow and expand, A&M can assist in identifying potential acquisitions, partnerships and joint ventures to strengthen their market position.
