Apr 23 2019 | Thought Leadership | By

Creating a top tier health plan: What are the key drivers? – Part 2

This Perspectives series looks at the challenges provider-sponsored health plans (PSHPs) can face. Part 1, Why Provider-Sponsored Health Plans Fail, examined the market dynamics motivating provider organizations to launch health plans. Part 2 discusses the need to focus on the key factors at launch that will drive success for a PSHP.

When health systems look to launch their own plan (a provider-sponsored health plan or PSHP), they are making a strategic decision that supports the organization’s strategic initiatives. While each health system has its unique set of initiatives and goals, when exploring a provider-sponsored Medicare Advantage (MA) plan, typically one of the following factors has prompted the move:

  • Market payers are not being collaborative and/or sharing collaboratively;
  • health systems want to manage more of the premium dollar;
  • systems want to create stronger alignment with independent providers;
  • health systems need to flip their Medicare margin profile; or
  • these systems want to assist the organization’s transition in the move to value.

A health system launching a PSHP has two unique advantages: Knowing its provider network to inform network design and knowing its patients to inform go to market strategy. Playing to your strengths is critical, and many systems lose focus here—often trying to mirror how other MA market payers have launched their plan, copying how a commercial plan looks, and focusing where hospital locations are—and failing to differentiate their benefits. While the end goal is important to keep in mind (and should be developed within the full vision), concentrating on a strong start will ultimately define success.

For example, while you may want to have a PPO plan in a few years, it does not mean you have to start here. Or you may want to cover a large geography just as the system does, but perhaps it is better to create focus with a smaller footprint and grow over time. For a PSHP, a high-performing plan is dependent on a high-performing network. This is the winning ticket.

Health systems, providers, and payers will have varying degrees of what success looks like for a Medicare Advantage plan. Each healthcare organization has unique goals. Nonetheless, when exploring the launch of an MA plan, aligning the organization on what success looks like is critical. At a high-level, the following parameters help formulate the vision:

  • Stars: 4 Stars of better (new plans automatically receive 3.5 Stars for first two years)
  • Profitability and Performance: Medical cost ratio (MCR) in high 70%s (prior to provider incentives)
  • Provider Network: Highly-engaged and motivated primary care network; strong physician leadership
  • Enrollment: Strong growth in the first two-to-three years then averaging ten-to-fifteen percent thereafter, depending on specific market dynamics
  • Market Share: At least 10-20% market share by Year 5, again depending on the market
  • Member Satisfaction: Affordable, all-in-on coverage; high consumer ratings through Consumer Assessment of Healthcare Providers and Systems (CAHPS) scores

As mentioned in a prior commentary, “Need to drive MA plan membership? Don’t ignore your Marketing and Sales strategy”, a disruptive sales and marketing strategy sets the stage for generating enrollment and, ultimately wining in your market. Successful plans pinpoint an unmet market need or gap in the market and leverage it—but this requires a highly tailored strategy. The provider network inherently fits into this sales and marketing strategy, and providers can often be your best Medicare Advantage proponents.

We have seen many provider-sponsored MA plans (and non-PSHP MA plans) fail to gain traction and critical mass over the last few years. Let’s take a look at key drivers for creating a top tier plan—and where health systems generally struggle:


Start Small Launched plan in multiple counties/markets across a large geography •       Limited focus

•       Lack of differentiated product in each market

Start Narrow Used broad, and unfocused, provider network (similar to a commercial plan) •       Limited opportunity to create strong panel density (number of patients per provider) to garner provider attention

•       Difficult to change provider behavior, which can drive medical cost and quality improvements

Start HMO Launched PPO product •       Difficult to coordinate care

•       Difficult to generate medical cost savings with attributed PCP and prior authorization for specialty care

Understand Your Partner Selected partner known for commercial and MA cost-plus operations •       Likely to fall behind MA competition in the market (Star Ratings, enrollment, MCR)
Educate Your Consumer and Be Unique Designed plan with similar benefit structure and network compared to competition; limited in addressing shortfalls of other coverage options •       Difficult to change behavior from consumers without a compelling and visible reason to switch
Expand Sales Channels Only used external brokers within sales strategy •       Limited opportunity to control beneficiary experience and maximize marketing ROI (versus deploying captive inside and outside agents)


As health system leaders continue to pursue new strategies to support their organization’s value transformation efforts, it is critical for them to understand the implications of staying focused and following proven strategies that will drive success.


Not sure where to start? Talk to one of our advisors.

Contact Us