Understanding Provider-Sponsored Health Plans: Opportunities and Risks

Provider-sponsored health plans (PSHPs) have emerged as a strategic option for healthcare systems seeking to mitigate shrinking fee-for-service margins, secure premium income, and advance value-based care models. However, the anticipated benefits have not materialized uniformly across the industry. Only a select number of systems, such as UPMC Health Plan with over 4 million members, Priority Health with its significant expansion through acquisitions, and Intermountain's SelectHealth covering over 1 million individuals, have successfully scaled their PSHP operations.

For executives, especially CFOs and CEOs, operating a PSHP is a critical factor—it can either enhance enterprise value through integration or become a liability that strains financial resources. The initial appeal of PSHPs lay in their potential for diversification and enhanced financial control. As hospital boards faced diminishing inpatient margins under traditional fee-for-service models, capturing premium revenues and investing in population health management emerged as attractive strategies.

Despite these potential advantages, transitioning to a payer role is fraught with challenges. Insurance expertise in actuarial analysis, risk management, regulatory compliance, distribution, and claims processing is often outside the realm of most hospital systems. This reality underscores the complexities and risks of entering the insurance domain unprepared. Industry professionals can access detailed insights and a decision-making framework to assess if a PSHP will be a strategic asset or a burdensome anchor in their planning.