Mount­ing health plan losses have hospi­tal sys­tems on edge

Modern Healthcare - - THE WEEK AHEAD - —Dave Barkholz

Hospi­tal com­pa­nies have been los­ing money left and right since they started a trend a few years ago to own and op­er­ate their own

health plans. Those fi­nan­cial fail­ures will be high­lighted as the new quar­terly earn­ings sea­son kicks off. Tenet Health­care Corp. and Catholic Health Ini­tia­tives are still try­ing to sell their health plans af­ter rack­ing up big losses on them in the past year.

Health­care ex­ec­u­tives had hoped the strat­egy of in­te­grat­ing hospi­tals, doc­tors and other care set­tings with in­sur­ance un­der one roof would lower spend­ing and im­prove care co­or­di­na­tion—a strat­egy hospi­tals tested a cou­ple decades ago, but it ul­ti­mately failed for those who had lit­tle ex­pe­ri­ence in the in­sur­ance in­dus­try.

CHI, one of the largest not-for-profit health sys­tems in the coun­try, lost $100 mil­lion on its in­sur­ance busi­ness in fis­cal 2016, while Tenet an­nounced in Fe­bru­ary that it lost $37 mil­lion on its health plan in earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­za­tion. Both CHI of Englewood, Colo., and Dal­las-based Tenet have vowed to exit the health plan busi­ness if they can’t find buy­ers for their strug­gling units. CHI’s in­sur­ance di­vi­sion, QualChoice Health, has hem­or­rhaged money since its in­cep­tion. QualChoice sells Medi­care Ad­van­tage plans and com­mer­cial plans to em­ploy­ers in six states.

Part­ners Health­Care Sys­tem, the par­ent of Mas­sachusetts Gen­eral Hospi­tal, an­nounced in De­cem­ber that it lost $100 mil­lion-plus on its health plan in fis­cal 2016 but was stick­ing to it. Part­ners’ Neigh­bor­hood Health plan was heav­ily re­spon­si­ble for swing­ing the sys­tem’s op­er­at­ing in­come from a $106.5 mil­lion gain in fis­cal 2015. Phoenix-based Ban­ner Health is also try­ing to right its health plans. The 28-hospi­tal not-for-profit saw op­er­at­ing losses in its in­sur­ance oper­a­tions widen to $153.8 mil­lion in 2016, com­pared with an op­er­at­ing loss of $38.7 mil­lion in 2015. Ban­ner is cut­ting ad­min­is­tra­tive costs, re­fin­ing ben­e­fit plans and fo­cus­ing on re­duc­ing hos­pi­tal­iza­tions, said Chuck Lehn, ex­ec­u­tive vice pres­i­dent of strate­gic growth.

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