Saturday, September 29, 2012

Health Plans Continue to Struggle to Reinvent Themselves

American health care insurers continue to scramble to try to reinvent themselves and discover a new business model that will be successful during a time of transformation and payment reform.  In previous blogs I have described several different approaches, some of which leave me skeptical. ( )

One of the most interesting and controversial attempts to reinvent a health insurance franchise appears to becoming unraveled.  I wondered in print if new Highmark CEO William Winkenwereder would continue to try to implement fired Highmark CEOKenneth Melani’s aggressive merger with the failing West Penn Allegheny Health System.  The new CEO did not have Melani’s historical loyalty to West Penn Allegheny, and many questioned the wisdom of the merger from the start. (  

Late last week, the West Penn Allegheny board called off the merger because Highmark wanted the health system to declare bankruptcy to get out from under nearly $1billion in debt.  Highmark had already acquired Jefferson Regional Health System, Premier Medical Associates (the largest independent multispecialty physician group), and planned medical malls to supplement West Penn Allegheny in a new integrated delivery system. (  Highmark also tried to acquire Excela Health, partner in its medical mall and gain majority ownership in the Westmoreland county provider network.  When Excela declined the offer, Highmark threatened Excela according to the Excela board chair: “The threat was clear – if Excela did not enter into an acquisition or affiliation with it, Highmark would use its monopoly position to destroy Excela,” said James Breisinger.  (

Reaction to the failure of the merger included Jan Jennings,  President of American Healthcare Solutions, who said, “It is the dumbest, most recless abandonment of fiduciary responsibility I have ever seen. I don’t think anybody from out of town sees West Penn Allegheny as some kind of crown jewel.  I just think it is a big mistake.” (

Highmark is not the only insurance company that is finding out that reinvention can be difficult.  When Patrick Geraghty left Minnesota Blue Cross and Blue Shield to run the Florida Blues, the Minnesota Board hired Kenneth Burdick largely because he had experience with the highly successful for profit UnitedHealth Group.  After six months on the job Burdick was fired due to “examples of leadership that weren’t optimal.”  Board chairman Vance Opperman was quoted as saying, “’What you have is a difference in culture.  The difference between for-profit and not-for-profit is pretty big…After looking at this for many hours and many meetings, we came to the unfortunate and unhappy realization that Ken couldn’t make the transition and couldn’t bring the leadership team with him.’” (

Another health care organization struggling to cope with the new health care environment is  Seattle’s Group Health Cooperative which recently decided to cut $250 million over the next 16 months to better position the organization in the new world. Group Health has already assembled the combination of hospitals, physicians, and health insurance plan that Highmark was trying to emulate in Pittsburgh.  However, CEO Scott Armstrong is facing three years of sharp declines in revenues, and he has arranged for Richard Magnuson, executive vice president and chief financial and administrative officer to leave the $3.5 billion health system.  (

HealthPartners of Minneapolis is a fourth health plan recently announcing a new direction by merging with Park Nicollet to respond to federal health care reform measures.  If approved by regulators, the new system will become the second largest in Minnesota with 1,500 physicians and two hospitals Regions in St. Paul and Methodist in St. Louis Park.   HealthPartners insurance plan covers 1.4 million people.  Keith Halleland, a health care attorney, states that the merger is part of a national trend to “’provide total cost of care for a variety of populations’” and to create “’one organization that can do everything for basically anyone in the health care environment.’” (

These four examples of health plans trying to create new business models for the 21st century offer a window into the complicated and evolving health care environment that is creating anxiety and opportunity for everyone involved in the industry. 


  1. Your last sentence seems better placed as your opening sentence Kent: “...the complicated and evolving health care environment that is creating anxiety and opportunity for everyone involved in the industry.”

    Struggle: Make forceful or violent efforts to get free of restraint or constriction.
    Scramble: A difficult or hurried clamber up or over something.

    I think there’s a big difference of meaning for those two words. Of course most people won’t read past the title and rarely make it to the end of a post. Are health plan’s really only ‘struggling’ or are they ‘scrambling?’ Or some combination beyond struggling and scrambling? Or are merely dealing with some combination of the sea change introduced by ACA’s juvenility, its general lack of clarity across key components and the manner in which this so-called “comprehensive health care reform” was forced uoon the American public and healthcare consumer. (Got to pass it before we can read it?)

    I suppose it’s always easy – and apparently fashionable – for certain thought leaders to bash payers. Surely these prescient thought leaders so quick to call attention to perceived payer foibles also appreciate that other healthcare constituents: patients, providers, sponsors (employers, unions, associations, etc.) AND our all-knowing government must scramble and struggle with this so-called “reform.”

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