Four years ago, the largest healthcare provider in northern Virginia and one of the region's smallest - but among the nation's largest - insurers came together to form a new health insurance company and health plan.
Innovation Health was born of Inova, a health system that holds a 56 percent market share in northern Virginia, and Aetna, a nationwide insurer that was running about fourth behind the Blues and others in the local market.
The joint enterprise has been successful beyond anyone's expectations, according to Russ Mohawk, president and CEO of Health Plans and Population Health Services for the Inova Health System.
"It's been ahead of budget every year since we started," Mohawk said.
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Innovation Health has served 190,000 customers over the last two years, according to Gary Thomas, president of joint venture markets for Aetna.
Inova and Aetna have joint ownership of Innovation Health and a 50-50 split in profits and risk.
"As a health plan, we understand the finance aspects," Thomas said. "As a large provider they understand how to deliver care effectively."
Inova provides the care management component, particularly how to effectively manage a high-risk population, such as those with chronic diseases. Inova serves more than two million people each year, including those in and around the Washington, D.C. metro area. It also provides much of the marketing.
"We spend a lot more money in northern Virginia advertising and branding ourselves than Aetna does," Mohawk said.
Aetna handles customer service, regulatory reporting, underwriting and other administrative functions, but it does not write nor renew the policies for Innovation Health.
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"All of the business in northern Virginia is written on Innovation paper, not on Aetna paper," Mohawk said.
The Innovation Health Insurance Company offers group products to local employees and Innovation Health Plans are available to individuals both on and off Virginia's healthcare exchange.
Despite having a separate board, CEO and company, Innovation Health has limited staff.
"To a great extent, it's a virtual company," Mohawk said. "All of the functionality is outsourced to Aetna."
In the move towards value-based, population health that all systems are facing, there's more efficiencies to being allied with a health plan, Mohawk said.
Redundancy and waste are reduced. There's been a solid 8 percent reduction in medical costs the first year, he said.
"We've been able to achieve cost outcomes and quality outcomes, and focus on the development of a clinically integrated network, Signature Partners," he said.
Innovation Health is fee for service but is moving towards value, Mohawk said. Signature Partners is where a lot of the clinical integration and innovation will occur.
For insurers, the payment to cost ratio has slipped, as a smaller number of beneficiaries are covered under group plans and a larger amount through government plans, whether it's the marketplace, Medicare or Medicaid, according to Thomas.
In this cost shift, government reimbursement pays less and the consumer picks up more of the cost through higher premiums and co-insurance.
"There's a general lack of affordability," Thomas said. "We can't continue to increase price."
In creating a new product design for a health plan, one integrated with health and wellness, the sky's the limit. The incentives are aligned to take have patients in the best of health, and to take care of those with acute illnesses.
"Our intent is to offer products, individual, small group, Medicare ... not only a health system, a financing chassey, regardless of where they are in their life," Thomas said.
Both see Innovation expanding to hospitals outside of the Inova network.
In the future, they see integrated provider and payer processes, including administrative data, revenue cycle, and claims.
The consumer will have one point of contact.
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"Picture a day where you call one location to address everything under the care continuum," Mohawk said "This is where we're heading."
"The market's ready," Thomas said. "There's an appetite for this."
Challenges include the length of time needed to forge a deal; having a good communications system in place; and also a strong executive leadership team to manage a separate venture.
The first recommendation is to do due diligence in finding a partner with like-minded objectives, Mohawk said. As in a marriage, pick the right one.
"We'd pick em again," Mohawk said of Aetna. "I've dealt with major players, they're advanced."
Mohawk and Thomas will speak on how the collaboration came together, how it works and recommendations, on June 28, at HFMA's ANI conference in a session entitled, "Achieving Success In Value-Based Care Via Joint Venture Health Plans."
Twitter: @SusanJMorse