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Weighing the Risks and Benefits of Joint-Venture Health Plans


Jill Sederstrom

shaking handsJoint-venture health plans could be an opportunity for payers and providers to join together to improve the member experience and reduce overall health care costs, but the structure is a departure from either entity’s past working relationship and is not without its challenges.

Experts in the industry say they have seen a growing number of joint-venture health plans being created in the last few years as some payers and providers are looking for ways to move beyond the more prevalent, and less risky, ACO structure in the hopes of improving patient outcomes and reducing costs.

Greg Maddrey, MPH, director of the Chartis Group, said theoretically ACOs and joint-venture health plans have similar goals; however, joint-venture health plans are a more invasive approach that require a greater level of commitment between payers and providers. 

While ACOs are effectively a contractual relationship where there is incentive funding for some specific type of performance and either party could terminate the contract depending on performance at any time, joint-venture health plans are a structural venture that include a meaningful level of capitalization from both the payer and provider. 

“It’s just uniquely different and it makes people behave differently,” Mr Maddrey said. 

In typical ACO arrangements, according to Lynn Dong, FSA, MAAA, principal and consulting actuary for Milliman, the ACOs are not insurance companies and they contract with payers for a specific population. The level of support from the payer differs and could require the ACO to develop care management initiatives or financial reporting processes.

“By contrast, in a typical joint-venture arrangement, the health plan retains the traditional insurance functions and the provider focuses more exclusively on population health management,” she said.

In many cases, it allows each entity to do what they do best and has the potential to more seamlessly improve patient experience and overall patient care.

A Recent Addition

Many players continue to enter into joint-venture health plan arrangements including partnerships between Anthem and Aurora Health in Wisconsin, Aetna and Texas Health Resources in Texas, and Anthem’s partnership with seven Los Angeles health systems to create the Vivity health plan in California.

In October, Aetna announced its plans to create joint-venture health plan with Banner Health to serve Arizona’s Maricopa and Pinal counties.

Each party will have roughly equal shares of ownership in the new company they are forming, which will be separate from Aetna.

“It will have a whole range of products that we have available, HMO-based and PPO-based, with a myriad of different options for employers to choose from including high-quality, narrow networks to multitiered networks to Aetna’s full broad network,” Tom Grote, president of the Arizona market for Aetna told First Report Managed Care

Mr Grote said the joint venture will build on the success the company has already seen with its Aetna-Banner ACO, which provides care for more than 48,000 members in Phoenix. 

“The reason why we wanted to move forward to a joint-venture was that we weren’t able to fundamentally change the member experience and the overall care delivery process working on a separate basis from one another, and we felt that coming together, combining our resources and capital, we’d be in a better position to truly impact the member experience,” he said. 

Under the joint-venture health plan, Mr Grote said they hope members will have access to a combined web portal where they can go to get both clinical and insurance information as well as a more coordinated customer service experience.

“In this case, Banner is going to have the lead on the care management aspect, so it’s not the insurance company telling the doctors what they can and cannot do, but it’s us providing information that the doctors need in real time to make the right decisions on behalf of the members,” he said. 

The Advantage of the Arrangement

Experts say the advantage of joint-venture health plans is that they have the potential to streamline care management, improve the member experience, and potentially reduce health care costs through increased coordination.

According to Ms Dong, providers could benefit by seeing increased volume, lower premium rates than broad network plans, and a greater number of people being steered to the network’s providers due to more limited provider networks.

Payers are likely to benefit by being able to negotiate more favorable reimbursement arrangements.

“For payers, a key goal is to offer the co-branded product at a lower rate than the broader network plans to increase plan membership,” Ms Dong said.

If a joint venture is successful, it could also result in the delivery of higher-quality and more cost-effective care. 

Mr Maddrey stated that a joint-venture health plan may also be a good option for providers who are looking for more investment and commitment than an ACO arrangement typically brings, but who don’t want to take on the full responsibility and commitment of creating their own health plan.

“You would say if I want to get those capabilities and I want to take a bigger position than just a simple ACO contract, maybe a joint venture is an opportunity where we each contribute expertise and don’t have to recreate and go through the experience curve again,” he explained.

Obstacles Along the Way

But while there are a lot of theoretical advantages for both payers and providers to enter into these type of arrangements, Mr Maddrey said joint-venture health plans are also fraught with challenges.

“It’s tricky to do for several reasons, one is the legacy business models of both the payer and provider are inherently, in many cases, adversarial,” Mr Maddrey said.

Both payers and providers will need to find a way to move past how they’ve historically done business and focus instead on what decisions best benefit the joint venture, even if it means making a decision that may not appear to benefit the payer or provider, specifically.

“I mean you really have to believe in the people across the table because you are going to be doing things that are different and challenging and you have to believe that each party is doing what is in the best interest of the joint venture to be successful,” Mr Grote said.

Joint-venture health plans also take considerable time to establish and negotiate. Mr Grote said it took more than a year to form the joint venture agreement with Banner Health, which is one of the largest nonprofit health systems in the United States. 

“It’s really critical that we devise a structure that’s fair to both parties so that it can withstand over time because if it’s unbalanced in one way or the other, benefiting one of the two entities, ultimately it’s not going to be durable,” he said.

Finding the Right Partner

Overall, experts say it is still too early to tell whether joint-venture health plans will deliver on their potential promise.

They are an arrangement that is not for everyone. According to Ms Dong, joint ventures typically require significant rate concessions from the provider and may also include other financial guarantees and loss sharing.

“For the provider, whether the arrangement is a good fit will depend on the provider’s risk tolerance, desire for increased market share, and ability to succeed under the arrangement,” she said.

For payers, on the other hand, it will require significant up-front work during the negotiations process. Ms Dong explained that payers will also need to provide extensive ongoing financial and analytical support to providers and will need to be able determine which providers will make the best partners.

Mr Grote added that there are three things Aetna looks for in joint venture partners: a significant presence in the market, the necessary capital and the financial wherewithal to start an insurance company, and a corporate wide belief in value-based care.

“When we enter into these discussions, we spend a lot of time talking about what our visions are and what we’re trying to accomplish,” he said. “It has to be a direct alignment between the organizations to make this work, because it’s definitely divergent from our current course of business.” 

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