For health systems that enjoy a dominant market share within their region and have a clinically integrated physician organization, the choice going forward is relatively clear: develop your own narrow-network health plan, either on your own or with a partner MCO. But second-place health systems, particularly in mid-major markets, are reaching a crossroads, with the choices of: merging with a nonprofit health system, being acquired by a for-profit hospital chain, or affiliating more closely with a major health plan.

These decisions have the potential to shift the entire hospital/health insurance landscape at a consumer level over the next five years, possibly more than the first five years of Obamacare implementation.

Last October, I told Abraham Aboraya at the Orlando Business Journal that central Florida's runner-up health system, Orlando Health, should consider a merger. A couple of weeks ago, the Orlando system formally announced that it was exploring merger options. Orlando Health's choice is one faced by nearly every health system that does not yet have the capacity to launch its own narrow network. Orlando Health's larger rival, Florida Hospital, recently launched its own health plan, and is taking steps to become one of the leading health systems throughout the Interstate 4 corridor, having already established a significant presence in the major cities along this route. How can Orlando Health keep up?

I've thought for some time that Orlando Health should merge with BayCare Health System, the largest system in Tampa Bay by a narrow margin. Both BayCare and Orlando Health have integrated physician groups that have been active in creating accountable care contracts with major insurers, and both are large nonprofit health systems, which tend to stick together because of a common mission (while for-profits tend to prefer the suburbs). BayCare is also an expanding conglomeration of several smaller health systems, and in 2013 added Winter Haven Hospital, which is smack dab in between Orlando and Tampa. I still think this is the most likely scenario, with the combined health system launching a narrow network product on the exchange for 2016.

But at the same time, CHS/HMA could be a strong contender for Orlando Health, should the health system go the for-profit route. Orlando Health already has several major projects with UF, including a new cancer center affiliation. UF Health is also expanding, having recently partnered with Munrow Regional Medical Center, taking a 10 percent stake in the Ocala hospital, just north of Orlando. The remainder of that hospital was acquired by for-profit Health Management Associates (itself recently acquired by Community Health Systems).

HMA has allowed acquired health systems to develop their own regional branding, most recently evidenced by the 2013 creation of Bayfront Health in Tampa Bay, of which UF Health is also a partner. CHS already partners with Orlando Health on one hospital. With more than two dozen hospitals in the state, CHS would further solidify its presence with the addition of Orlando Health and an expanded partnership with the academic medical center at UF Health. But what about the health insurance component?

HMA has worked closely with Florida Blue on BlueSelect, the insurer's narrow network product. Nearly all HMA hospitals in Florida are in BlueSelect (as is Orlando Health), and the insurer formed an ACO with Wuesthoff Health System, HMA's health system on the Space Coast. Narrow networks such as these could develop a co-branded symbiosis, where customers of BlueSelect know that they will get their hospital care at a facility that is part of a BlueSelect Network.

A possibility that may be more likely in the coming years is for Orlando Health to be acquired by a major insurer, such as Florida Blue. Should narrow networks become accepted by even large employer groups, insurers may simply direct members to their own health systems and away from rivals, hearkening back to the older steerage under the HMO model.

If your midsize market has two or three health systems that control the lion's share of inpatient volume and are affiliated with most of the local physicians, I have just described the blueprint for the next five years. The biggest players will launch their own insurance arms, while the runner-ups merge with other health systems or health plans. The focus on narrow network plans in the insurance exchanges will make consumers much more aware of provider affiliations, which ideally will result in lowering costs and increasing quality.

Follow Mark Cherry on Twitter @MarkCherryDRG.


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