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Sunday, 05 April 2015 19:12

Priority Health benefits from better care coordination models

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Continued efforts to better manage medical costs and implement a new economic model are credited for lifting Priority Health’s bottom line for 2014.

The Grand Rapids-based nonprofit health plan posted 2014 consolidated net income of $94.8 million, versus $73.0 million in 2013.

Priority Health’s consolidated premium revenue increased more than 10 percent to $2.54 billion, generating $86.2 million in operating income after paying $2.15 billion in hospital and medical claims and incurring $285.9 million in administrative expenses. Priority Health also generated $8.7 million last year in investment income last year.

“We had a good year all around,” said Priority Health CFO Mary Ann Jones. “We’re in a great position for continuing growth and we continue to invest in innovative products and initiatives to transform health care within the provider area.”

For its primary HMO business, Priority Health reported net income of $91.3 million, an increase of 55 percent from the net income of $58.6 million in 2013, according to an annual financial report filed with the Michigan Department of Insurance and Financial Services. The financial performance for last year came on total revenues of $1.98 billion, $82.0 million in underwriting gains and $7.0 million in investment income.

Much of the improved financial performance resulted from the significantly higher underwriting gain in 2014, which was up 70 percent compared to the previous year.

Priority Health’s HMO grew membership slightly to 363,036 from 362,130, with a gain in individual membership outpacing a decline in members from group policies.

The HMO business accounts for a majority of Priority Health’s business across all product lines that collectively have about 626,000 members.

Priority Health Choice Inc., the health plan’s Medicaid HMO, reported net income of $200,386 on total revenues of $341.0 million, an underwriting loss of $432,790 and a net investment gain of $636,176. Priority Health’s Medicaid HMO lost $100,874 a year earlier. Membership in the Medicaid HMO increased to more than 100,000 from about 75,000.

Jones attributes the improved financial performance to the benefits of initiatives that emphasize better care coordination and management of members’ costly chronic medical conditions. Members with one or more chronic medical conditions account for 80 percent of health care costs, she said.

The health plan, following a key industry trend, also has been transitioning hospitals and physicians to value-based contracts that base their reimbursement payments on the quality of the patient care they provide, medical outcomes and efficiency.

A majority of providers in Priority Health’s care network are now in a value-based contract, which helped to lower the year-to-year increase in hospital and medical claims paid to about 1 percent in 2014, Jones said. Priority Health’s HMO last year paid $1.68 billion in claims, according to its financial report to the state.

“That’s been one of the contributors to our success. We have been able to manage medical costs,” Jones said. “But we’re never satisfied. We still know there’s lots of room and opportunity to better manage health care.”

As Priority Health and other insurers seek to further implement value-based contracting, care providers are increasingly willing to go along with reforms and replace the traditional fee-for-service model, Jones said.

“The conversations are getting easier, although we don’t have that same level of response with every provider,” she said. “We have some partners where the light bulbs are coming on and they’re understanding the need for change and looking for ways to change the payment model to not only help them transform care but keep their program sustainable as well.”

Read 1929 times Last modified on Sunday, 12 April 2015 20:53

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