Hospitals

Why Cleveland Clinic jumped into the insurance fray

A group of healthcare experts weigh in whether the decision by Cleveland Clinic to become a payer was related to the uncertainty in Washington surrounding the Obamacare repeal or whether it was a strategic move to take on more risk.

 

Last week, news broke that Cleveland Clinic is entering the insurance market by teaming up with Oscar Health, a New York insurance startup. [And yes, it’s co-founded by Jared Kushner’s brother, Josh]

Starting this fall, the Cleveland Clinic | Oscar individual health plans will be available in certain northeastern Ohio counties on its own and on the Ohio healthcare exchanges. Coverage will begin in January.

The announcement comes at a time when Washington is grappling with an Obamacare repeal vote in the Senate possibly as early as next week.  However, experts appear to be split on whether the Affordable Care Act repeal had anything to do with Cleveland Clinic’s decision to jump into the insurance game.

“Hospitals and insurers are both looking to build certainty any way they can amid potential legislative changes and an uncertain regulatory climate. Taking on risk for your own population can help with that from a provider perspective, and is a way to build a loyal customer base if you can control the insurer side,” said Will Hinde, managing director of healthcare and life science practices, West Monroe Partners, a technology consultancy, in response to an online query. “This also may be an attempt for the Clinic to shore up stability in Ohio’s ACA exchanges and show a commitment to finding innovative solutions.”

Meanwhile, another industry insider cast this as a purely strategic move as the healthcare industry transitions to prizing value over volume, and unrelated to healthcare’s partisan wars.

“It’s unlikely this is directly linked to the ACA repeal. Value-based care is here to stay and that means payer-provider collaborations and market consolidation are inevitable,” said Jack Plotkin, CTO of VirtualHealth, a care management firm, in response to an online query. “Cleveland Clinic is making a strategic decision.”

It’s interesting that the strategy involves partnering with Oscar Health. The company founded in 2012, a few years after the ACA passed, was fully behind the state exchanges and yet ultimately had to bow out of the Dallas and New Jersey markets. The insurance newcomer was hobbled by the same factors that led more established players like UnitedHealthcare, Aetna, and Humana to also exit some exchanges

The company is a new breed of insurers that seeks to leverage technology to get more data that can be shared with the likes of the Clinic thereby enabling the hospital to make certain cost-cutting or saving decisions. Oscar has raised millions of dollars, including a $400 million round in February 2016, led by mutual fund company Fidelity with other investors like CapitalG, the growth-equity fund of the parent company of Internet search giant, General Capital, Khosla Ventures and many others.

By hitching its name to a marquee healthcare institution, Oscar Health’s profile is likely getting raised, as is the possibility to make money.

Meanwhile, the announcement itself underscores the trend of payer-provider integration. In recent years many health systems have introduced proprietary health plans offered to a narrow network of patients, explained Adam Powell, president of Payer+Provider Syndicate, a management advisory and operational consulting firm focused on the managed care and healthcare delivery industries.

“Just as Oscar has partnered with the Cleveland Clinic, Aetna has created a similar product with Banner Health in Arizona, Virtua in New Jersey, Memorial Hermann in Texas, and a number of other health systems,” Powell said in response to an online query. “Cleveland Clinic’s partnership with Oscar represents an effort to capitalize on this know-how and to share in the benefits that can come from taking on more risk.”

If the collaboration is successful and an affordable, quality insurance product becomes available, Ohio may be the ultimate winner.

“Aetna had withdrawn its participation at the beginning of this month, and at that point, it looked like the exchange was on a downward slide,” said Darren Schulte, CEO of Apixio, a company that makes an insurance risk-adjustment tool, in an email response to an online query. “Oscar in partnership with Cleveland Clinic could offer a compelling product on the exchange that provides world-class care at an affordable price.”

Even as it wades into uncharted territory with a new kid on the block, Cleveland Clinic is keen to not ruffle any feathers. The concluding sentence of the joint news release read like this:

Cleveland Clinic will continue to work collaboratively with other health insurers.

Photo: skynesher, Getty Images