He believes they may have some success with this diversification strategy in their local geography—in the individual market and small employer groups—but beyond that, the geographic limitations make their product unappealing to large employers.
"So they'll grow to a particular size but probably won't have much success beyond that," he says.
But that doesn't mean Aetna wouldn't be willing to work with them on that strategy.
"We can extend their reach and make any health plan opportunity they pursue more successful," says Kennedy.
CHI's Serrano says the hospital giant is interested in making the switch from volume to value as quickly as possible. Because CHI has a presence in many different regions, the pace of change varies dramatically. That means in some areas without insurer or employer support, it can be more difficult to make the switch just by partnering with insurers alone.
"We can accelerate the switch by making some of the moves that we think we could also make as a partner with a health insurer, but in many regions, they're reluctant," Serrano says.
"By fielding our own products, we're putting together clinically integrated networks, and taking the initiative to make those moves starts our internal cultural transformation sooner," he says.
Doing this work organically, and through providing services that traditionally are offered only by health plans, CHI hospitals and regions can learn what it's like to be in a mode of reimbursement that conflicts with delivering volumes of services.
"Starting up some of these business channels is putting our money where our mouth is," Serrano says. "It's a lot easier to say to patients and employers if you're already doing it, that you can demonstrate the value you can bring."
Serrano says even in the early innings of the value transformation attempt, payers have moved closer to providers, and in many markets, they are demonstrating success in vertical integration.
But he says the process is often slow. The employer community has begun to show signs of impatience because while employers' third-party administrators or health insurance partners might have a lot of programs aimed at improving value, those aren't necessarily connected to the healthcare delivery system.
"In the larger urban markets, we're telling employers that we can be part of accelerating support for employees—not necessarily taking over for their insurer or third-party administrator, but employers are now actively seeking out health system partners," Serrano says.
Scale is critical, which is why at this point, only the largest of health systems are even investigating competing with health plans on their own turf. To truly move forward in population health management, developing high-performing networks, or even in owning health plans, even the largest health systems likely won't be able to match the geographic reach and economic depth of most large health insurers.
"That may be a differentiator for us," says Serrano. "We're well positioned to do that."
Will the value proposition stick?
Cigna's Salmon is optimistic that its collaborative accountable care (CAC) groups with large physician clinics will soon be the dominant way in which it does business with providers. From the 36 active CACs in 2012, Cigna expects to have more than 100 by the end of this year.
"We see this type of initiative growing, and that will offer continued growth to groups that are developing the capabilities necessary to participate," he says. "And 100 won't be the end of it."
CHI's Swindle says the experimentation going on across the country means the eventual answer to bringing better value to healthcare services is still unknown—perhaps something "none of us has thought of yet. "We're constantly pushing to find the format to be successful, but we have to be flexible enough to go left if the industry is telling us to do that," he says. "We don't know if we want to be a health plan, but we will have to integrate some of what they do."
He believes CHI's foray into Medicare Advantage is a good learning lab for determining whether further investment in a health plan structure is warranted.
"A lot of health systems are going through this—maybe they're not as deliberate as we are," says Swindle.
Whatever way the industry shakes out over the next decade or so, Aetna's Kennedy says expectations are high and people have to keep in mind that healthcare providers, from the smallest one-physician practice to the largest health system, are working to fundamentally change their business model—"something that's very difficult.
"If you're not careful, you can threaten the financial viability of the organization," he says. "The complexity and risk in shifting is not to be underestimated."
Struggling with how to operationalize that shift is common because the very notion of what a physician does and is accountable for is changing fundamentally.
"This will take five years or more to play out," Kennedy says. "Organizations that get it right will be dominant. Quite a few will get it wrong or choose not to pursue accountable care and find themselves in financial difficulty."
And quite a few organizations are still taking a wait-and-see attitude.
"One would understand why they might," Kennedy admits. "Many attempts in the past that have been billed as 'the next big thing' have fizzled and not created the value that was anticipated."
He mentions many programs, such as disease management or HMOs, that have failed to live up to their initial transformational billing.
"Players are making a very risky bet in this circumstance because this is much bigger than disease management," he says. "It involves changing the mechanism of how healthcare is bought and paid for, and I'm seeing change in the industry on a scale I've never seen before. Those who don't embrace value-based care are putting their organization at substantial risk and may regret that strategy."
This article appears in the June 2014 issue of HealthLeaders magazine.