Thinking Forward: What Happens When the Hospital Is Also the Insurer?

By Stewart Gandolf
Chief Executive Officer

This is a curious business concept: One of New York’s largest hospital networks wants to keep their hospital beds empty. That notion, says Kaiser Health News, would be the case for some hospitals that want to provide health insurance.

Disruptive business ideas are innovations intended to improve a product or service in ways the market does not expect. In this one, the hospital would be both the insurer and the service provider. It’s clearly a disruptive approach that will require a fresh approach to hospital marketing and public relations to communicate.

Hospital groups around the nation, including North Shore-LIJ Health System in New York, are laying the groundwork to be insurers, according to the Kaiser article. They are “under intense pressure from public and private insurers, as well as employers, to accept flat-rate payments for care, rather than reimbursements for every service. And that puts pressure on hospitals not just to manage costs, but to keep people well – in short, to act more like insurers.”

It’s an emerging trend that’s reportedly beginning to get some traction. “Hospitals from Colorado to Virginia are exploring similar strategies spurred by rising costs and incentives in the health law. An estimated 20 percent of networks market an insurance product…[and] another 20 percent are exploring doing so.”

Not surprisingly, there’s a lively discussion surrounding this idea, with supporters pointing to patient benefits (improved care, maybe lower costs), and others concerned about fewer options for patients and possible pushback from doctors and the insurance industry itself. What’s more, patients may not like the idea either.

“This is the dumbest idea I’ve heard since ‘I’m going to invest all my money in Facebook’s IPO and get rich!,’” writes business consultant Vince Kuraitis, JD, MBA. In a no nonsense blog post, he puts forward “6 Reasons [for hospitals] To Lie Down Until the Urge Goes Away.”

On his list, principal and founder of Better Health Technologies, Kuraitis, tells hospitals:

“You’re too late. Health insurance was an attractive and profitable business in the 00s, but after passage of the Accountable Care Act it’s been commoditized.

“You have bigger fish to fry. Focus on developing accountable care capabilities. The AHA estimated that hospitals will need to spend $11-25 million to develop an ACO. Get going.

“Do you really want to risk waking the sleeping giants in your neighborhood, i.e., the existing health insurance companies? When health plans realize YOU are the competition and start steering patients elsewhere, on average 95 percent of every dollar of revenue lost will come straight off your bottom line.”

As healthcare reform continues to phase-in system-wide changes, this discussion will continue. And we’d like to hear your voice. Tell us what you think or offer your comments below.

Lonnie Hirsch


Stewart Gandolf
Chief Executive Officer at Healthcare Success
Stewart Gandolf, MBA, is Chief Executive Officer of Healthcare Success, one of the nation's leading healthcare and digital marketing agencies. Over the past 20 years, Stewart has marketed and consulted for over 1,000 healthcare clients, ranging from practices and hospitals to multi-billion dollar corporations. A frequent speaker, Stewart has shared his expertise at over 200 venues nationwide. As an author and expert resource, Stewart has also written for many leading industry publications, including the 21,000 subscriber Healthcare Success Insight blog. Stewart also co-authored, "Cash-Pay Healthcare: Start, Grow & Perfect Your Cash-Pay Healthcare Business." Stewart began his career with leading advertising agencies, including J. Walter Thompson, where he marketed Fortune 500 clients such as Wells Fargo and Bally's Total Fitness.



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