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At Memorial Hermann, a Bold Push into the Provider-Sponsored Health Plan World

November 6, 2016
by Mark Hagland
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Neil Kennish of Memorial Hermann Health System discusses his organization’s PSHP
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In the early and mid-1990s, the leaders of many U.S. hospital systems plunged headlong into developing provider-sponsored health plans (PSHPs), with decidedly mixed results. While a relatively small number of those health plans did well and were maintained in the decades that have followed, many others floundered. Among the reasons that so many failed: a lack of alignment between the sponsoring hospital systems and their physicians; an inability to fully align the incentives of any health plan to optimize utilization with the incentives of nearly all hospitals back then to maximize inpatient utilization; a lack of strong, visionary leadership; awkward governance and management structures; and core deficits both in terms of the data and information systems needed to support and facilitate PSHP operations, and the data analytics capabilities, both technological and human, to facilitate the optimization of PSHP processes.

A lot has changed since then, of course. And with the intense push on the part of the federal, state, and private purchasers of healthcare to force improved cost control and enhanced patient outcomes; and with tremendously improved data, information systems, and data analytics tools, the landscape is profoundly different now for the leaders of patient care organizations.

One organization that has made a success of the provider-sponsored health plan proposition so far has been the Houston-based Memorial Hermann Health System, which has a health plan with over 75,000 members. The health plan was created back in 2011, when the health system bought a preferred provider organization (PPO). Since then, the growth of the health plan has been strong, with individual and group commercial plan offerings, as well as Medicare Advantage.

Separately, Memorial Hermann leaders have also been boasting about the fact that the Memorial Hermann Accountable Care Organization (MHACO) has been ranked as the top-performing ACO for three years running, in the Shared Savings Program (MSSP), sponsored by the Centers for Medicare and Medicaid Services (CMS), through the Medicare program. In three years of participation in the program, according to Memorial Hermann officials, the MHACO has generated a total savings of nearly $200 million. As a Memorial Hermann spokesman noted, the success of ACOs is particularly important in Texas—a state whose government has rejected Medicaid program expansion under the Affordable Care Act (ACA), and where, according to the U.S. Census Bureau, nearly 10 percent of Harris County (the largest county in Texas) residents currently are over the age of 65; what’s more, the spokesman noted, by 2050, nearly one in five Texans will be senior citizens. The MSSP ACO is run through the provider organization, not the health plan; but the same kinds of efforts to provide care management and leverage data to improve outcomes are evolving forward in parallel at the health plan and at the ACO.

Meanwhile, as an integrated health system, Memorial Hermann is the largest not-for-profit health system in Southeast Texas. The system, with more than 24,000 employees, serves Southeast Texas and the Greater Houston community.  Memorial Hermann’s 14 hospitals include four hospitals in the Texas Medical Center, a hospital for children, a rehabilitation hospital and an orthopedic and spine hospital; nine suburban hospitals; and a second rehabilitation hospital in Katy.

Recently, Neil Kennish, an associate vice president at Memorial Hermann Health System who helps manage the Memorial Health System Health Plan, spoke with Healthcare Informatics Editor-in-Chief Mark Hagland regarding Memorial Hermann’s progress in this area. Below are excerpts from that interview.

How many members are in the Memorial Hermann Health Plan?

As of today, we’re at about 75,000 members.

And which insurance products do you offer?

We offer individual and group commercial and Medicare Advantage plans.

What proportion of each?

Over 90 percent of our membership is in our commercial plan.

How long has your plan been in existence?

It’s been an interesting journey. Memorial Hermann acquired our PPO license back in 2011. And we’ve been quietly trying to grow our book of business until 2014, when we started to get more aggressive. I took over Sales and Marketing in the fall of 2014, and we were at about 45,000 members, and we’re at 75,000 members.

What have been the biggest challenges and opportunities as a provider-sponsored plan in the Houston market?

First and foremost, provider-sponsored plans are limited by the health system behind them. And even though we’re the leader in our market as a provider, we’re at about 25 percent. And if you take an average group, the disruption factor could be 60-80 percent, as far having to find new providers. So the challenge is making the network robust enough so that people won’t feel limited, but also of value in terms of price point. In contrast, with direct-to-consumer, whether individual or Medicare Advantage, it’s easier to convince people. With a group, the administrator of that group plan is having to decide for a bunch of people.

Are there some broad tensions in the strategic goals between the plan and the health system?

I wouldn’t say there are tensions; I would say it involves striking a balance. And the health system is trying to migrate away from fee for service and towards a population health-driven system. And that’s one of the reasons they’ve gotten involved in a health plan. That’s an underpinning strategy for all provider-sponsored plans.

How is that working in relations between the plan and the physicians?

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