Best’s Special Report: Vertical Integration Momentum Builds as U.S. Health Insurers Seek to Expand Capabilities

OLDWICK, N.J.--(BUSINESS WIRE)--
U.S. health insurance companies’ focus on finding innovative ways to manage the cost of health care better while improving member health and enhancing engagement continues to drive the growth of vertical integration strategies, according to a AM Best report.

In its Best’s Special Report, titled, “U.S. Health: Vertical Integration Takes Many Different Forms,” AM Best states that health insurers have deployed vertical integration strategies to improve patient outcomes, drive efficiencies, enhance medical cost management, improve the coordination of care and expand access to care, as well as implement new healthcare programs and technologies. This focus intensified from 2018 through 2020 but has continued over the past two years, partially in response to COVID-19.

Today, a broad range of health insurers and provider organizations, including publicly traded plans, Blue Cross Blue Shield Plans, regional insurance carriers and national and regional hospital systems, are pursuing vertical integration strategies. Many insurers have focused on physician groups, medical clinics and urgent care centers to build affiliated healthcare delivery capabilities. Urgent care and retail health clinics also satisfy the convenience factor consumers seek. The availability and use of telehealth and remote care also has grown tremendously the past two years because of the pandemic.

“Integration and partnerships among hospitals, physician groups and health plans can be successful at addressing continuity of care, especially when there is a system of information-sharing under HIPAA guidelines,” said Sally Rosen, senior director, AM Best. “Additionally, the financial alignment of all parties can allow for greater collaboration, which can lead to better health outcomes for members. Cultural and mission alignment among parties is an aspect of more successful models.”

Access to behavioral health services has been a longstanding concern for insurers, given its importance in an individual’s overall physical health. The need for these services has become even more essential because of the pandemic and the increase in social isolation. “Virtual care delivery for medical and behavioral health is particularly attractive to younger individuals who prefer more convenient care delivery than traditional office visits,” said Bridget Maehr, associate director, AM Best. “These are services that members may find valuable and can result in greater member satisfaction and retention.”

At the same time, the report notes that vertical integration strategies, as with any type of business venture, involve risk. Vertical integration mergers and acquisitions can be costly and time-consuming, with concerns from regulators and legislature. Business combinations and integration can be complicated, with significant execution risk. Integrated care delivery will continue to evolve, but one size obviously does not fit all. Some of the divergence in strategies is driven by the needs of a plan’s membership, the characteristics of a certain geographical location, the mission of an organization and the changing needs and dynamics of the market.

Although the ultimate goal of these strategies is cost-efficient quality care, whether vertical integration creates greater efficiencies and lowers overall costs remains to be seen. Regardless, vertical integration does support core health insurance operations and provides insurers with a source of business diversification, as well as financial flexibility from nonregulated revenue and earnings.

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=319996.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2022 by A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Bridget Maehr
Associate Director

+1 908 439 2200, ext. 5321

[email protected]

Sally Rosen
Senior Director

+1 908 439 2200, ext. 5280

[email protected]

Christopher Sharkey
Manager, Public Relations

+1 908 439 2200, ext. 5159

[email protected]

Jeff Mango
Managing Director,

Strategy Communications

+1 908 439 2200, ext. 5204

[email protected]

Source: AM Best