Hospitals and health systems have the ability to shape more effective health care through choices they make about managing their own employee health plans.

Your hospital’s employees and their dependents represent a population that is a controlled risk group. Additionally, the Health Insurance Portability and Accountability Act and Employee Retirement Income Security Act include provisions that reduce legal and systemic barriers to self-insured health plan success. Through experience with their own plans, hospitals can glean design and delivery tips to successfully take on risk and create successful population health programs for other groups.

As a trustee, you may be asked to advise your health system about accepting risk and entering into value-based care. While your board may not have a great deal of experience or knowledge in the area, the good news is, everything you need to know to successfully participate in risk arrangements likely already exists in your health system. Many hospitals and health systems operate self-funded employee health plans; therefore, your organization may already be in a risk arrangement. A hospital-run employee health plan can expose your health care organization and board to all the business concepts they need to succeed in value-based care.  

Learning the ropes

Health care organizations can analyze critical data from their existing employee benefit plans to better understand their risk profile.

For example, your organization already knows where employees and their dependents receive care, what covered services are the most expensive, which individuals are the sickest and costliest to care for and which providers have gaps in care for the individuals your organization covers. These data will help your organization create complete care networks and better work with providers by encouraging changes in their practice patterns and providing incentives for closing care gaps.

The single most important component in the successful operation of an employee health plan is the ability to mine your organization’s data to determine the best plan design and set metrics for measuring success. A mountain of immensely valuable information is available for hospitals and health systems to analyze; it should not be overlooked because it is tied to the millions of dollars they already spend on their own employees’ health insurance.

Choosing partners

Running a health plan often requires hospitals and health systems to work with external partners. How to choose the right partners is another skill hospitals and health systems already have and can leverage to support self-funded health plan performance.

The broker and plan selection criteria that health care organizations use to select their existing employee health plans often can be leveraged to make the right choices in aligning with the back-office, claims administration and medical management partners they need to operate a self-funded plan. The key is to make sure these new partners share your organization’s fiscal and clinical goals and can provide you with transparent and timely information about the plans they manage.

After your hospital or health system picks the right business partners, it will need to more deeply understand its insurance risk. This will require more data mining, analytical capabilities and actuarial support. Finally, the right network of providers — those that deliver care most efficiently and effectively — is critical to success. 

Planning ahead

As a hospital or health system trustee, you also should understand that employee health plans can help your organization identify the skills and expertise needed to successfully manage other populations.

Sometimes, health systems jump into risk before they are ready. They may assume value-based care is easier than it really is and fail to build the needed foundation — resulting in excessive costs and poor performance. Alternatively, the most successful provider-run health plans have often started on the road to risk by first establishing their own employee health plans.

Starting with an employee plan allows an organization to shape outcomes while controlling all parts of the journey toward successfully managing risk. When health care organizations build and run their own plans, they learn how plan design shapes the utilization patterns of those covered and can encourage use of lower-cost care alternatives and discourage use of higher-cost options. Organizations also learn which providers are achieving desired outcomes and which are not. Therefore, when they move into assuming full risk for other populations, these hospitals and systems are better prepared and likely to make a more successful transition to broader participation in value-based care.

The keys to successfully accepting risk may lie in plain sight through development of a hospital’s own employee health plan. Today’s innovative health systems are building networks and gaining experience with their employee plans to teach themselves how to take on risk — with a population about which they already have years of data and from which they can most easily learn.

Ryan Smith ( is vice president of market solutions for Valence Health, Chicago.