and CHIP Reauthorization Act ( MACRA ).
By adding an insurance arm to the IDN and becoming an IDFS , the organization can move into a population health environment . The majority of people enrolled in commercial insurance plans have less that $ 700 of health care claims in a year . However , the most expensive 10 percent of the population consumes 65.2 percent of health care dollars ( Kaiser Family Foundation ). The successful IDFS understands the risk that a population presents to the financing side of the organization and understands the types of patients that can bring revenue to the hospitals and doctors of its network . An IDFS can still participate in Medicare ’ s “ Alternative Payment Models ” ( APM ) for its physicians and hospitals , but also can participate in Medicare Advantage . The health plan portion of the IDFS can benefit design that creates incentives for care through the hospitals and physicians in the IDFS and disincentives for health plan members going to non-participating doctors and hospitals . Currently , Baptist Health with its small health plan is the only IDFS in Kentucky .
But it is a different story in Pittsburgh , which is home to two giant IDFS organizations — Highmark , Inc ., and University of Pittsburgh Medical Center , better known as UPMC . These two systems approached their current roles as IDFS in different fashions . UPMC has 25 academic , specialty and community hospitals in its system , with the largest in Pittsburgh , but smaller hospitals throughout Western Pennsylvania . Some 3,600 doctors based in 600 clinical practices are employed by UPMC . UPMC initially developed a small health plan just to take care of its employees . But as UPMC got into difficult reimbursement negotiations with the various insurers in Western Pennsylvania — and especially with Highmark Blue Cross — UPMC decided to expand its insurance product offerings . The individual marketplace under the Affordable Care Act helped propel UPMC to become the largest insurer in Pittsburgh , leapfrogging over Highmark Blue Cross in the city .
To be more competitive and to meet regulatory requirements for access to care , UPMC has had to include additional physicians and hospitals in its network beyond those owned by the System so that the UPMC insurance product now includes 7,500 physicians and 80 hospitals . Currently three million people in 29 counties are covered by the UPMC insurance product . The UPMC insurance has brought more patients to its IDFS . Hospital census for the 20 UPMC owned facilities has increased to an average of 81 percent occupancy . However , the UPMC system recently reported that its operating margin in 2016 was down to 0.9 percent . This has been blamed on hospital expansion costs and higher than anticipated medical expenses for its membership .
Highmark , Inc . has moved into the IDFS space from an entirely different route . Formerly the largest health insurer in Western Pennsylvania , Highmark Blue Cross began experiencing greater competition from UPMC , Aetna and other insurers . The competition was intensified when the payment negotiations between
Highmark and UPMC broke down ; and the UPMC doctors and hospitals began to leave the Blue Cross network . With a key part of the Highmark network gone , the Blue Cross affiliate in Western Pennsylvania looked to a new strategy . In 2013 , Highmark acquired the academically strong but financially weak West Penn Allegheny Health System ( WPAHS ), and renamed it Allegheny Health Network ( AHN ). Ironically , a few years prior , WPAHS had sued both Highmark and UPMC for alleged antitrust violations . That lawsuit was dismissed , allowing the acquisition of WPAHS by Highmark . Now Highmark had its own Integrated Delivery System and AHN could drop out of the UPMC network . AHN is second to UPMC in size of its network with eight hospitals and 2,100 physicians .
The approach to developing an Integrated Delivery and Financing System in Pittsburgh now has its two largest health systems developing into both provider and payer institutions from different pathways . UPMC became an IDFS by adding a health plan to its health care delivery system . On the other hand , Highmark acquired a hospital system with its employed physicians on top of its existing insurance arm . Both provide insurance options for employers , Medicare Advantage , and individual exchange its insurance system . The network difference and the prices of the insurance products now force companies and individuals to “ choose sides .”
Are there any lessons for Louisville ? There are no announced options like Pittsburgh ’ s situation in Louisville . But one could imagine scenarios where a hospital system would wish to expand its patient base by creating an insurance product . Baptist Health has been there with its Baptist Health Plan , and that could create interest by other systems to do likewise . As physician groups in Louisville gain experience in managing risk with Medicare , they may want to bring in a commercial product too . On the other hand , with the blocked mergers of Anthem-Cigna and Humana-Aetna , Wall Street is expecting all four companies to be acquiring other insurers and / or delivery systems to grow their presence . We cannot ignore the lessons from the Pittsburgh experience , as what has happened in one River City may happen in another .
Dr . James is the Senior Medical Director for Highmark Inc . in Pittsburgh , PA .
CITATIONS
1 .) Health Care Costs : A Primer ; The Henry J Kaiser Family Foundation , http :// kff . org / report-section / health-care-costs-a-primer-2012-report / 2 .) UPMC Facts & Stats , http :// www . upmc . com / about / facts / pages / default . aspx 3 .) UPMC Annual Report 2015 http :// www . upmc . com / about / finances / Documents / 2015-annual-report-print . pdf 4 .) Pittsburgh Health Care Giants Take Fight To Each Other ’ s Turf , NPR , http :// www . npr . org / sections / health-shots / 2014 / 08 / 19 / 341399014 / pittsburgh-healthcare-giants-take-fight-to-each-others-turf 5 .) Highmark Corporate Profile 2015 https :// www . highmarkhealth . org / annualreport2015 / 2015corporateProfile . pdf
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