West Market Director, Lumeris
Yesterday, Kaiser Permanente and Geisinger Health announced their new collaboration, Risant Health, established to acquire a handful of community health systems including Geisinger. This strategic shift will revolutionize the national healthcare landscape.
In the context of Kaiser Permanente’s historical expansion strategy, this move starts to make more sense. Since 1955, Kaiser Permanente has been expanding its signature closed HMO model beyond CA, with varying degrees of success. Currently, Kaiser Permanente operates in eight states and the District of Columbia, retaining its model of integrated care delivery with health plans and Kaiser Permanente-owned clinics. In regions without Kaiser Permanente hospitals, they form partnerships with local hospitals to deliver inpatient care.
However, recent market dynamics such as Intermountain’s acquisition of Colorado’s SCL Health have challenged this expansion strategy. In states without hospital assets, Kaiser Permanente’s expansion success has been lackluster and is now under threat from national competitors. SCL Health was Kaiser Permanente’s inpatient partner, but post-acquisition, it’s hard to envision a scenario in which Kaiser Permanente directs patients to its competitor, Intermountain’s hospitals. Furthermore, why would Intermountain want to contract with Kaiser Permanente when they will almost certainly bring their SelectHealth plans to Colorado instead?
Kaiser Permanente depends on homegrown population health management technologies and its proven clinical workflows to operate its closed HMO model. In some expansion states like Colorado and Washington, some affiliates don’t operate the full Kaiser Permanente model. This makes it difficult to ensure similar financial and clinical outcomes to Kaiser Permanente’s most successful market, California.
Risant Health’s new strategy involves acquiring high-performing community health systems that contract with commercial payers, and it plans to introduce Kaiser Permanente plans as one of the payers (not the sole payer). This initiative signals that Kaiser Permanente and Geisinger are betting on value-based care becoming the prevailing care delivery model, underpinned by the belief that a multi-payer HMO strategy is more attractive for consumers in markets outside of California.
To stay competitive, IDNs must shift their business models from fee-for-service to value-based arrangements, and the clock is ticking. I still have questions about how Risant Health will bring even more scale and efficiency to Geisinger, a 10-hospital system that is already operating at scale. I believe that the short-term strategy will focus on sharing clinical best practices and leveraging Geisinger’s payer contracts, and that a broader population health strategy will be unveiled in coming years. For the healthcare market nationally, this shift suggests that Risant Health is banking on value-based care becoming the predominant care delivery model, a message incumbents should heed to stay competitive.