Hospitals Cutting Out Insurance Companies…. Or Insurance Companies Taking Over Hospitals?

A recent article suggets that large hospital systems are moving to cut insurance companies out of the health care process, but a closer examination suggests it may be the insurance companies making the moves.
A recent article in the Fiscal Times warns that "Hospitals Plot the End of Insurance Companies," citing comments by health care and business professionals regarding "an increasing trend in the industry toward cutting insurance companies out of the [health care] process entirely, as large, regional hospital systems move into the insurance business."

But is this trend really about "the end" of insurance companies?

The article points to the Mount Sinai Health System as one example of cutting the insurance company out of the health care process:
"Dr. Kenneth L. Davis, CEO and president of Mount Sinai Health System, the largest health care provider in the state of New York, said that starting next year, Mt. Sinai will begin offering its own Medicare Advantage plan. It will look for other opportunities to bring premium payments directly into the hospital system, rather than filtering them through insurance companies. * * * For both non-profit systems like Mt. Sinai and for-profit systems, he said, retaining more and more of the health care premiums paid by consumers is essential to providing a full spectrum of care."
The article further describes the Kaiser Permanente health care consortium, "which combines a health insurance company with subsidiary hospitals and medical practices to create a fully integrated health care delivery system.

According to the article, Dr. Ezekiel Emanuel, "chairman of the Department of Medical Ethics and Health Policy at the University of Pennsylvania and one of the architects of the Affordable Care Act," has suggested that the health care industry is beginning to see the so-called "Kaiserification" of the industry.

But the Kaiser Permanente model is not a hospital system "cutting out" the insurance company. Rather, it is a large health insurer that essentially owns and controls a subsidiary hospital and provider system.

Thus, perhaps the trend is not hospitals plotting the end of insurance companies, but insurers beginning to take over existing hospital systems or develop their own medical provider systems.

Consider another example of "Kaiserification" provided but the Fiscal Times article: WellPoint. WellPoint is a large insurer that "recently completed the acquisition of a health care company in California, apparently with an eye toward replicating the Kaiser model in some form."

In the end, whether it's a hospital system with a subsidiary insurance company, or an insurer with subsidiary hospitals and medical practices, it doesn't seem to signal the end of insurance companies.

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