Tag: vertical integration

Recon takes an analytical look behind select developments in healthcare

Are some of Kaiser’s regional ambitions starting to pay off?

PDF: Are some of Kaiser’s regional ambitions starting to pay off? We have produced a new study evaluating developments in Kaiser’s regions (outside of California). The report provides an explanation for recent improvements in performance as well as leadership and governance changes. Further, we identify several implications for the future of Kaiser strategy. The Kaiser Permanente model has a heavy infrastructure, and so it requires a lot of local market share and operating scale to deliver a positive net underwriting margin (we roughly size how much using statistical analysis). Yet,

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Can convenience care be a platform for an insurance product?

Summary A Portland-based urgent care operator is launching a health plan from scratch The strategy targets the busy and healthy with the convenience of a retail network providing “store brand care”; a simple, consumer oriented service model at low cost. Carving out this segment can plausibly allow for sustained advantage in admin, medical cost and revenue management. The plan has hit a speed bump with regulators on pricing, so evidence of this model’s market appeal will come slowly. Convenience care has historically played nice with the ecosystem, but Oscar’s explosive

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Making flanks something for the enemy to worry about: the Cleveland Clinic-Promedica deal and the emerging battle for northern Ohio

Summary Earlier this year, Catholic Health Partners, the largest provider in Ohio, signed two deals which put it on a competitive collision course with Cleveland Clinic Cleveland Clinic has few options to further solidify its already strong position inside Cleveland, so it had to look elsewhere for a competitive response  With a clinical affiliation with Promedica, Cleveland Clinic can competitively threaten Catholic Health Partners in Toledo / northwest Ohio If Cleveland Clinic’s relationship with Promedica matures into a full affiliation, they could acquire Promedica’s Ohio insurance license, opening a whole

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Getting the troubled Highmark-West Penn relationship back on track: an outside-in speculation

Summary Highmark and the West Penn Allegheny Health System (WPAHS) are not aligned on their vertical strategy to counter UPMC in the Pittsburgh market  WPAHS can only absorb a portion of Highmark’s care demand now being met by UPMC. So its upside on the success of Highmark’s vertical strategy is capped Highmark would prefer a deal with UPMC if it get reasonable rates: the status quo looks better than the uncertainties of a vertical model build A large share of UPMC’s business still comes from Highmark which makes UPMC vulnerable.

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Compete by creating more competitors: the Heartland Health deal and Aetna’s strategic jiu jitsu

Yesterday, Aetna announced a deal with Heartland Health (an integrated delivery system serving northwest Missouri, northeast Kansas and southeast Nebraska) to create a new health plan for the small group market (2-50 employees) for 2 counties in Missouri and 1 county in Kansas. Heartland Health has a ~350 bed acute care hospital (Heartland Regional Medical Center) with 200+ medical staff physicians, and the Heartland Clinic with 100 providers in 23 locations. Most important, recent financial evaluations have given Heartland Health a startling 82% market share in primary service area (!).

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The Steward-Tufts deal and the looming threat of provider-led narrow network insurance

The Stewards-Tufts deal announced today will create a narrow network insurance product targeting the small group segment. As reported, members covered by the plan must get all routine care from Steward providers except for complicated procedures and when authorized by a Steward physician. In return, premiums should be 15-30% below other products. Tufts and Steward will share the premiums. Some local market context: Steward Health Care is owned by Cerberus Capital Management is the only major for profit system in the market. The deal follows at the heels of a

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Upping in ante in Pittsburgh: the health information exchange arms race

A few weeks ago, UPMC announced an agreement among nine area systems to spend $4M over the next two years to launch a health information exchange called ClinicalConnect. Reportedly, Highmark (and presumably the West Penn Allegheny hospital system it is in the process of purchasing) requested to be a part of the initiative but was refused. Building electronic connections across hospitals – particularly between community systems (such as the non-UPMC participants in ClinicalConnect) and tertiary centers such as the UPMC facilities – helps make transitioning patients easier by making full

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Partners’ acquisition of Neighborhood Health Plan: reinforcing the role of community health centers in the care continuum

Much of the public speculation (for example here and here) regarding the acquisition of a local high quality safety net health plan — is it about locking in Medicaid volume? or about doing a “good deed” before regulators make decisions about Partners market influence? – is not very persuasive. Partners is already under intense scrutiny — a program of pushing Medicaid volume to its own facilities would contradict its public promises, exacerbate regulator suspicion and not be very profitable anyway. And if regulators believed Partners has the market power to

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Highmark and West Penn: it’s about mitigating consolidation, not transforming the system

Highmark will invest up to $475M in the West Penn Allegheny Health System, a move characterized as a prelude to purchase. This is no bold move to drive closer integration of information flows and care decisions or align incentives in a transformative vertically integrated model. My take: this is about desperately propping up the last competing provider standing in a highly concentrated hospital market. Highmark’s hand was forced by West Penn’s financial bleed out. But, in response, UPMC has thrown down the gauntlet in a move that will reshape the

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Did Wellpoint overpay for Caremore? No….not yet anyway

Summary Wellpoint probably paid full value for Caremore (if that company’s performance is as powerful as limited data suggests) but did not overpay. In addition, Caremore offers several powerful upsides if Wellpoint can continue to grow the model. However, Wellpoint will need to tread carefully to avoid damaging its purchase, given an uncertain record with vertical models (NextRx) and the inherent challenges in integrating fast-growing, PE-fueled innovators into large, mature businesses. Some indicator of Wellpoint’s strategy for Caremore will be given by its approach to Arizona — a key market

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Revolution in Roanoke? Perspectives on the Aetna-Carilion deal

Summary  The line between health plan and provider continues to evolve: the Aetna-Carilion deal exemplifies providers backward integrating into insurance (and contrasts with other providers exiting commercial insurance business e.g. art part of last year’s Coventry deals) The Aetna-Carilion alliance appears to have compelling, multi-layered business logic and there will surely be more of these sorts of couplings in markets where there is a strong provider brand and a health plan with low share but deep capabilities and ambition. Using the provider brand to sell insurance creates challenges for health

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