In Acquiring Share of AmeriHealth, Cooper Crosses Hospital-Insurer Divide

Hospitals and insurers have traditionally been adversaries in payment negotiations, but that line could soon be blurred in South Jersey, where Cooper University Health Care is purchasing 20 percent of AmeriHealth New Jersey.

And to some, it’s not just a question of blurring a line, it’s a matter of crossing one.

According to Uwe Reinhardt, a Princeton University economist, the agreement, which requires the approval of state regulators, could raise concerns about violating antitrust law. He noted that while serving as part-owner of AmeriHealth, Cooper would be in a position to treat AmeriHealth more favorably than other insurers.

“That could put [rivals] at a competitive disadvantage,” Reinhardt said.

An AmeriHealth spokeswoman said that the company would not receive favorable treatment and wouldn’t have access to other insurers’ rates when it sets its prices.

Officials with both the Camden-based hospital and the Cranbury-based insurer said that current patients wouldn’t see a difference in services, but indicated that the partnership would allow them to reduce patients’ medical costs through closer coordination of care.

AmeriHealth also intends to offer specially priced plans that will reduce copayments when patients use Cooper and its doctors instead of other area providers.

Cooper Chairman George Norcross said AmeriHealth was an attractive partner since it is the only insurance company that is based solely in New Jersey.

“It’s large enough but yet small enough to be a participant with healthcare systems, and it’s innovative enough and forward-thinking enough,” to be a suitable partner, said Norcross, a leading political powerbroker in South Jersey.

The agreement would make Norcross an even larger figure in the healthcare world. As executive chairman of Conner Strong & Buckelew, he already a major insurance broker and consultant.

The partnership will be based on a model similar to accountable care organizations, in which an insurer attempts to compensate providers for how well they perform and keep costs down, rather than for each service they provide. The model “is designed to enhance communication with patients and among providers and give patients easier access” to doctors, according to the statement announcing the agreement.

Cobranded AmeriHealth-Cooper insurance plans will be available in 2014, with a goal of making them available on the state’s health benefit exchange in 2015, AmeriHealth President and CEO Judith L. Roman said. She expects many individuals and small groups that currently go without insurance to buy plans through the partnership.

Both Norcross and Roman said they hope that AmeriHealth builds similar partnerships with other hospitals elsewhere in the state.

“This is just the beginning,” Norcross said.

Roman said the agreement would offer various options in South Jersey, including opportunities for employers to choose commercial insurance and to self-insure.

Both Roman and Norcross highlighted the importance of having a patient served by a group of doctors who are coordinating care, known as a patient centered medical home.

Roman said patients would benefit from aligning the incentives for hospitals, doctors and health plans. She said the goals of the agreement are to improve patient outcomes and member satisfaction while reducing the use of the hospital for inpatient and emergency-room visits.

Norcross said the agreement could mark the end of the traditional sparring between insurers and hospitals.

“For far too many years, probably decades, there’s been pretty much an adversarial relationship between the payers and the providers, whether they are hospitals or physicians or otherwise,” Norcross said, adding that the ability of patients to choose among providers makes Cooper sensitive to their needs. “We’re a Four Seasons Hotel that happens to provide world-class healthcare, because we’re in a competitive marketplace today.”

He said such agreements are well suited to New Jersey, which has few insurers but many hospitals.

Reinhardt said the agreement was reminiscent of an unsuccessful trend in the 1990s, in which hospitals and doctors sold insurance directly to employers. This effort was complicated by many doctors’ aversion to alternatives to traditional payment models.

While these physician-hospital organizations “didn’t work at that time, it may this time work a little bit better because physicians are more inclined to work for an organization on salary,” Reinhardt said.

Reinhardt also questioned the opportunities for savings for AmeriHealth in the agreement.

The deal is subject to state Department of Banking and Insurance approval, which is expected in three to six months, according to AmeriHealth officials.

_________________________________________________

NJ Spotlight, an independent online news service on issues critical to New Jersey, makes its in-depth reporting available to NewsWorks.