Ascension, Centene Partner to Launch Medicare Advantage Plan

July 31, 2018 - The nation’s largest non-profit health system, Ascension, and health payer Centene Corporation are teaming up to launch a Medicare Advantage plan in multiple markets, the organizations recently announced in a joint statement.

The health system and payer signed a letter of intent to pursue a joint venture that would create a Medicare Advantage plan by 2020. The plan would be the preferred model for both the health payer and the 153-hospital system that operates over 2,600 sites of care.

“Working with Centene to create a new Medicare Advantage plan aligns with our mission of serving those who are vulnerable and struggling the most, which all too often includes our seniors,” stated Anthony R. Tersigni, EdD, FACHE, Ascension’s President and CEO. “We look forward to developing innovative, transformational approaches to serve this growing population in the many communities we serve as part of our advanced strategic direction.”

Medicare Advantage is growing in popularity among Medicare beneficiaries. One in three beneficiaries are now enrolled in a Medicare Advantage plan, and enrollment is slated to grow, CMS Administrator Seema Verma recently reported in a speech at the Commonwealth Club.

Ascension and Centene, which are both based in St. Louis, Missouri, plan to tap into the growing Medicare Advantage market to bring value to their patients.

READ MORE: Payer Collaboration Key to Value-Based Reimbursement Strategy

“We are pleased to pursue this joint venture with Ascension to create a differentiating offering for Medicare Advantage across multiple markets,” said Michael F. Neidorff, Chairman and CEO of Centene.

“This joint venture will bring together two leaders with decades of experience across markets and creates an opportunity for scaled payer-provider collaboration,” he continued. “We share a commitment of serving the underserved and intend to leverage the best capabilities of both organizations to provide high quality, affordable healthcare to support the needs of low-income seniors.”

The Ascension partnership is another example of Centene dipping its toes into the provider market as of late. The health payer signed a definitive agreement to acquire Community Medical Holds Corp., a community medical group in Florida, in March 2018.

Centene plans to use the acquisition to expand its Medicaid, Medicare Advantage, and marketplace health plan business lines.

Centene’s recent partnerships are just more examples of payers and providers joining forces to boost their Medicare Advantage and health plan offerings.

READ MORE: Preparing the Healthcare Revenue Cycle for Value-Based Care

All provider-sponsored health plans formed or announced between 2015 and 2017 were joint ventures between providers and health payers, researchers reported in a February 2018 Health Affairs blog post.

More recently, management consulting firm Oliver Wyman reported 22 new partnerships between providers and health plans in 2018 as of May 31. Nearly three-quarters of those partnerships (73 percent) involved branded or joint venture insurance products.

Some notable new partnerships in 2018 include Blue Cross Blue Shield of Rhode Island and Lifespan (individual market plan), Security Health Plan and Mayo Clinic (group employers), and Wellcare and UNC Health Alliance (Medicare Advantage).

Health payer heavy-hitters Aetna and Cigna are also continuing to partner with hospitals and health systems to bolster their insurance products. The large payers announced two joint ventures with Sutter Health and Allina as of May 31, 2018.

Hospitals and health systems are looking to enter the insurance market. The organizations are seeking new revenue streams as reimbursement rates fall and the pressure to decrease their costs intensifies.

READ MORE: Exploring Two-Sided Financial Risk in Alternative Payment Models

Geisinger Health Plan’s CFO also described a provider-sponsored health plan as a hospital’s “natural next step” with value-based care and risk.

“There's a lot of different forms of risk-taking that can occur,” Kurt Wrobel recently told RevCycleIntelligence.com. “You can think about it on a final payment basis. You could think about it on a total cost of care basis. The other would be like what we do here at the Geisinger Health Plan, which is to have the insurance company directly connected to the providers, so you have greater accountability around the entire premium dollar and greater ability to manage that premium dollar.”

“The purest form of risk-taking is when you have the insurance company connected with the health system,” he emphasized.

However, going at a provider-sponsored plan alone is challenging for hospitals and health systems. Just four of 37 provider-sponsored health plans formed since 2010 were profitable five years later, a recent Robert Wood Johnson Foundation analysis found.

Five of the plans had also gone out of business, while two were in the process of being sold.

Hospitals and health systems have trouble managing the insurance side of a provider-sponsored health plan. Providers need the ability to pay claims, provide comprehensive customer service, and implement rate-setting and risk management skills.

For example, Geisinger Health Plan has over ten credential actuaries to help manage the insurance side of the provider-sponsored health plan. Health systems typically do not employ this level of actuaries.

Entering a joint venture with a payer can help providers access the administrative and customer service capabilities needed to successfully operate a health plan.

Health payers also benefit when providers offset the risk associated with running an individual marketplace, employer-sponsored, or Medicare Advantage plan. In addition, they can leverage the brand of a high-quality health system to attract customers.

As the insurance and care delivery space face constant reform, payers and providers are looking to team up to tackle the financial challenges of running a business in the age of value-based care.

Alternative payment and care delivery models put pressure on providers and payers to control a patient’s costs and outcomes across the entire care continuum. Health plans jointly operated by a provider and payer help both stakeholders to better control spending and outcomes.

The industry is also likely to see more of these joint ventures happening after the Justice Department approved the acquisition of Time Warner by AT&T.

Ascension and Centene noted in their statement that the letter of intent is non-binding. The joint venture will be subject to due diligence, a negotiation of definitive terms, approval by each company’s board of directors, and other conditions.

But the AT&T-Time Warner deal may pave the way for future joint ventures, such as the one proposed by Ascension and Centene. Even larger partnerships may also be possible.