To understand what could happen in the Indianapolis health care market, we have to look 360 miles east, to Pittsburgh.
There, a large hospital system built around a medical school, UPMC, started an insurance plan 15 years ago. And it built up enough market share that it is now threatening to pull out of the Blue Cross network there.
That threat came primarily as a response to a decision by the Blue Cross insurer, called Highmark, to buy a chain of hospitals in order to compete more directly against UPMC’s blend of insurance and health care.
Could the same thing happen here?
That’s a question I’m asking myself after writing this weekend about Indiana University Health’s efforts to “re-launch” its health plan.
IU Health has nearly 100 people working for it who are employed by Evolent Health, an organization started by UPMC to help other hospitals develop the kind of insurance plan it has.
There are now 15 hospital systems working with Evolent, including other academic medical centers like Ohio State and Vanderbilt. Evolent says it is building a national network of hospital-based insurance plans.
That’s significant because Blue Cross insurers, such as Indianapolis-based WellPoint Inc., are able to win contracts from national-scale employers (like the federal government) because the Blue Cross network gives it access to doctors and hospitals in all 50 states. Other large insurers like UnitedHealthcare, Cigna and Aetna have similar provider networks across the country.
It looks like Evolent wants to join their company. That would give locally focused hospitals, like IU Health, the ability to serve clients that have lots of workers here, but some others scattered around the country.
That could help IU Health rapidly add to the 50,000 people it currently covers—most of which are its own employees.
Evolent is also helping IU Health develop a different (though not entirely new) kind of insurance offering that, instead of offering the lowest discount and the broadest network of providers, offers to reduce overall health care spending by keeping patients healthier.
The CEO of IU Health Plans, Jim Parker, formerly ran WellPoint’s Blue Cross health plan in Maine and then was chief of staff to former WellPoint CEO Angela Braly. He described his work at IU Health Plans as “blurring the line” between the traditional notions of hospital and health insurer. He hopes the clinicians at IU Health get so good at tracking and managing patients' health, that IU Health Plans' employees have to do less and less of that work over time.
Other local hospital systems are playing with the same idea of reducing spending by keeping patients healthier, which is called population health management.
If employers warm to the concept—which is a huge if, given the strong preference in Indiana for broad provider choices—IU Health could start to chip away at the now-dominant market share of Indianapolis-based Anthem Blue Cross and Blue Shield.
In Pittsburgh, UPMC has gotten enough employers to buy in. It now claims about 11 percent of the commercial insurance market, compared with Highmark Blue Cross’ 75 percent. UPMC has said it will no longer accept Blue Cross insurance on Jan. 1, 2015.
As I pointed out in my article, IU Health is in no position to do anything similar now. It derived 20 percent of its patient revenue last year from Anthem.
And WellPoint CEO Joe Swedish, a career hospital CEO until his most recent job, shot down speculation that he would pursue hospital acquisitions like the one the Highmark Blue Cross did this year with the six-hospital chain West Penn Allegheny.
But brokers I talked to last week said they’re keeping a close eye on IU Health’s insurance plan to see if it roils relationships with Anthem or UnitedHealthcare, the other major health insurer serving Indiana.
And the insurers themselves are watching closely, too.
"Every insurer and Blue Cross plan in the country is taking a close look" at what's happening in Pittsburgh, Ted Schwab, partner at the health and life sciences practice of Oliver Wyman, a New York-based management consulting firm, told MedCityNews in July. "If this one is successful, you're going to see activity at an unprecedented level.”