JPM23: Intermountain Health, UCHealth launch joint venture to accelerate value-based care in Colorado

SAN FRANCISCO—Investors and JPM attendees got an opportunity to hear from Intermountain Healthcare's new leadership team as the 33-hospital heavyweight plots out its strategy to accelerate value-based care, including a new clinically integrated network it plans to launch with UCHealth in Colorado.

With the close of its merger last year with SCL Health, Intermountain Healthcare says it is now the eleventh-largest nonprofit system in the country.

As part of the deal, the organization gained eight hospitals and now employs over 59,000 employees, runs 385 clinics across seven states and operates a health plan covering 1 million Utah and Idaho residents.

Prior to the deal, Intermountain was active across its home state of Utah as well as Idaho and Nevada. SCL, a Catholic health system, operated in Colorado, Montana, Wyoming and Kansas.

The combined entity is expected to bring in $14.7 billion in annual revenue, executives said.

Transitioning from from a volume-based, fee-for-service healthcare operation to a value-based model is a key priority for Intermountain's executive team.

"The journey to value-based care is a 50-year journey and we’re probably about halfway through it," said Janie Wage, executive vice president and chief financial officer, who previously served as SCL Health's CFO before the merger.

"Depends on our markets, in Nevada, we're in a full-risk environment, with very little fee-for-service revenue and in some markets, were are more risk-based than in others We’re taking lessons from those markets that are more advanced in value-based care and translating those into the markets that are more fee-for-service. Our goal is to meet every patient where they are. We’re willing to work with all payers who want to us as we move into more affordable healthcare and more cost-effective healthcare in a value-based world," she noted.

Before the merger with SCL Health, about half of Intermountain Healthcare's revenue was based on at-risk value-based care models, said Rob Allen, Intermountain Health's new chief executive officer.

"After the merger, because of the dynamics in SCL Health's markets, we're about 37% and growing. We don’t anticipate getting to where they are all with those contracts but we’d certainly like to see that grow continually higher because we think it creates a better alignment," said Allen.

Previously Intermountain's long-standing chief operating officer, Allen took the helm as the health system's new CEO on December 1.

He touted Intermountain Healthcare's recently announced partnership with UCHealth, Colorado's largest health system, as an example of the health system's initiatives to accelerate value-based care. 

The partnership will establish a new clinically integrated network in the state, bringing together 700 primary care doctors and "hundreds" of clinics and hospitals across Colorado. The partnership will also provide a new health insurance option to individuals with Medicare Advantage and/or individual ACA coverage in Colorado in 2024, pending regulatory approval, the systems said.

The two health systems plan to remain independent and said they will operate the clinically integrated network as a separate joint venture entity. The JV is expected to close this spring.

The clinically integrated network aims to provide higher-quality health care for more than 300,000 residents at lower costs, executives said.

Allen said the two organizations were still working out the fine details. "At a high level, it's really the concept of how to you bring the right players together and the right players are a mix of interest and capabilities. In the greater Denver market, the partnership with UCHealth makes a lot of sense. We believe there are clear aligned interests here and there are clear capabilities that both bring to the table that make that not only doable but stronger to do it together," he said.

He noted that Intermountain Healthcare's strategy with value-based care goes beyond the financial contracts.

"We often talk about it as a financing mechanism and, frankly, if that’s what we’re focused on, it will fail. The financing mechanism is an important part, but it’s really about the clear alignment of all the players," he said. "Are those buying the insurance aligned with getting what they want to get out of the transaction with the insurer who is aligned with what they want to get out of the transaction with the provider who is providing care and the specific patient and provider along the way. Value-based care is about creating alignment for all those people and entities along the journey. The financing mechanism facilitates our ability to further align that work and spur people more effectively through that alignment."

The merger with SCL Health boosted Intermountain's footprint and revenue, but the health system also sealed a number of other M&A deals to expand its reach.

The organization acquired HealthCare Partners Nevada (now Intermountain Nevada), the second-largest physician group in the Las Vegas area, Saltzer Health in Boise, Idaho and also picked up air transport company Classic Air Medical to reinforce its rural care services and extend telehealth capabilities.

Allen said Intermountain continues to keep its eye on opportunities in the market but big merger deals like SCL Health are "not in the hopper" right now.

The health system looks at M&A opportunities from different angles, he said. The air transport deal is an example of a true acquisition where the health system will “Intermountainize” them, he said.

"We say this is the way we do it at Intermountain and you’re now a part of the team. We see those in the buckets of acquiring capability and acquiring reach and we look at those as they come along," he said.

Growth is an important part of Intermountain's long-term strategy, he noted.

"We will continue to look for opportunities. We’re going to be diligent and pragmatic about it and make sure that when we engage in opportunities we see value creation for those we serve and we see added value for the organization and our ability to effectively operate with that new part of the organization as we go forward," Allen said.

Some future acquisitions will be focused on adding new service lines or new medical practices to keep up with population growth, he said, but the health system also will consider "tuck-in" acquisitions to enhance its capabilities.

"We're organized across 630,000 square miles in three distinct regions. In each of those regions, we look at how to create networks and services to further our value-based care initiative and ambitions. So do we need to do other acquisitions, practice acquisitions or ambulatory service center acquisitions or home care or hospice agencies? We'll also consider growth through partnerships," he said.

On the finance side, as the health system contends with inflationary pressure, executives expect to try to negotiate higher reimbursement rates with payers, Wade said.

"Where we have higher governmental payer mix, we have less control over revenue inflation there, but we do have risk-based contracts and we can manage the cost of care there," she said. "With our commercial payers, most of those contracts are multi-year contracts and they were done before the COVID pandemic and the rate of inflation built into those contracts was not adequate to cover the dramatic rise in inflation we've seen in the last two years.

"As we go back to the table this year and next year, we're asking payers to pay their fair share. We’re doing our share by trying to reduce the cost of care and doing care more efficiently," Wade noted.