One of the Bay Area's most popular health systems is expanding its new health plan, trying to craft a unique value proposition in changing times and picking up some notable clients along the way.
Residents and employers of California's Sonoma County have a new choice for their health insurance, Sutter Health Plus, the HMO owned by the $9 billion dollar Sutter Health nonprofit hospital system.
The HMO is adding wine country to a service area that already includes Greater Sacramento and parts of the Central Valley, a few months after Sutter opened a new $292 million hospital and medical office in Santa Rosa, the heart of Sonoma. It also comes just about a month after Sutter Health's contract dispute with one of its largest payers, Blue Shield of California, which argued that Sutter's prices have been 20 to 30 percent higher than all other Northern California hospitals.
The organizations agreed to a two-year contract preserving in-network access to Sutter's 23 hospitals and 5,000 physicians. But with Sutter leaders believing that BCS was demanding unreasonable cuts, the new Sutter Health Plus plan is an opportunity to ply the integrated healthcare model pioneered by another rival, Kaiser Permanente, while also gaining leverage with commercial payers.
"Today's consumers demand more value for their healthcare dollars," said Steve Nolte, CEO of Sutter Health Plus and a former executive at UnitedHealth Group's Optum. "Brokers and employer groups in our current service area tell us that we're an attractive option based on price and access to Sutter Health doctors and care centers."
With its own health plan, Nolte argued, the Sutter Health network can "develop closer, more direct partnerships with employers and patients, and make high-quality care more affordable."
Licensed in January 2014, Sutter Health Plus has had a tepid start. The insurer considered selling public exchange plans in Covered California, but ended up not going forward this year, and it lost some $13 million in first three quarters.
Sutter Health Plus executives see those as startup and investment costs that will pay off. The HMO may sell in Covered California for next year, in a rating area of greater Sacramento, where it would be compete against Kaiser, Anthem Blue Cross, BCS and Western Health Advantage.
Already, Sutter Health Plus has about 2,500 members in the Central Valley and 9,500 in Sacramento, including city and county government workers and a number of small and mid-size private employers.
Sacramento city workers have the choice of plans from Sutter, Kaiser or Western Health Advantage. They previously could access Sutter providers via Health Net, but last fall the city decided to bypass the for-profit and just contract with Sutter Health Plus.
Sutter Health actually kind of tried its own health insurance before in the mid-1990s, when it jointly owned the HMO Omni Healthcare with Catholic Healthcare West (now Dignity Health). In 1999 the plan was sold at loss to Blue Cross of California.
This time may be different, though. Big hospital systems are being implored and incentivized to controls costs and provide more primary, community-based care. There are also two growing, government-supported individual insurance markets--the ACA exchanges and Medicare Advantage--and ongoing consumer dissatisfaction with narrow networks and rising premiums and deductibles.
Along with relatively lower premiums (for now) a large part of Sutter Health Plus' pitch is the brand of Sutter Health--the Palo Alto Medical Foundation doctors group, dozens of outpatient clinics, and hospitals like the academic California Pacific Medical Center in San Francisco.
"If the insurance is as good as the doctors are, then I'd love to switch, have it all in one system," one 42-year-old patient at Sutter's North Bay Health Plaza told the Santa Rosa Press Democrat. "My husband was thinking about switching to Kaiser, but I said no."