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The Keckley Report

Hospitals or Insurers: Who will Deliver Care?

By May 20, 2019March 1st, 2023No Comments

The relationship between hospitals and insurers is blurring. Consider:

  • More than 100 hospitals/health systems sponsor health insurance plans: in two of three, they are joint ventures with insurance companies like Aetna and Anthem. Almost 20,000,000 enrollees are enrolled in provider-sponsored plans led by Kaiser, Intermountain, Geisinger and others.

  • United HealthGroup employs 46,000 physicians and operates surgery centers, urgent care clinics and hospitals. It is the nation’s biggest insurer and #5 on the Forbes 500 based on revenues.

  • In its merger with Aetna, CVS CEO Larry Merlo announced its 10,000 retail pharmacies would become hubs of care delivering offering a full range of diagnostic and preventive health services.

  • Blue Cross plans in Texas, Florida, Illinois, and New Jersey offer primary care services through retail clinics and employed physicians and plans in North Carolina, Illinois, Montana, New Mexico, Oklahoma and others are following suit.

  • And so on.

Hospitals are tiptoeing into insurance and insurers are smart-stepping into delivery. Historically, their relationships have been testy: hospitals were the hub for community health activities and bore the bulk of risk for delivering state-of-art health services. Insurers served as negotiators on behalf of individuals, employers and government payers (Medicare Advantage, Medicaid managed care, et al.) seeking lower prices from hospitals. Three trends are accelerating the blur effect:

  • Hospitals are increasingly accountable for healthcare affordability involving transparent pricing and risk-sharing contracts with payers. Their response: integrate the delivery of care with financing (insurance) by sponsoring insurance plans and cautiously engage in alternative payment models.

  • Insurers are experiencing declining margins in their core business (insuring employer groups) as large employers become self-insured and enrollment growth shifts from higher-margin commercial services to lower-margin government services.

  • And private equity investors are exploiting flaws in each sector funding start-ups that leverage technologies for lower labor costs and optimal consumer experiences.


Vertical consolidation in both sectors is accelerating and the integration of delivery and financing is inevitable. Scale, scope, innovation and efficiency are strategic advantages in this environment and few regulatory impediments stand in the way. Thus, the lines between the two sectors will continue to blur.
In the near-term, to position favorably, each sector must address a noticeable Achilles:

  • Public Trust in Insurers: Consumers trust hospitals more than insurers for guidance about their care but think insurers credible in addressing costs. The trust deficit facing traditional insurers will likely dissipate as they become a trusted conduit for personalized information about treatment options their associated costs and prices and the track records of hospitals and clinician’s delivery.

  • Hospital Costs: The public’s cost concern about hospitals is more problematic: data showing price comparisons between hospital services are less than useful and frequently inaccurate. And media attention to hospital executive compensation and regulator intrigue about “not for profit” status loom large. After the current focus on drug prices subsides, Congressional concern about hospital costs and prices is likely to get more attention.

In the long-term, fully integrated systems of health that finance and deliver health services seem inevitable.  They will compete in an environment wherein consumers will bear a larger share of costs directly and their operations extend across regions or nationally. And, in the process, re-defined roles for safety-net providers, academic medical centers, public health, clinical research organizations, community health centers and others will emerge.   


The likelihood Medicare for All will pass in some form seems unlikely, but incumbents in the system, including hospitals and insurers, can ill afford to take solace. Both will be accountable for the delivery and financing of care and each will be challenged to address legacies that impede transformative changes.