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Hospital system's insurance company posts massive growth

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Revenue within the health insurance division of North Shore-LIJ Health System tripled in the past year, and the Great Neck, N.Y.-based organization has no intentions of slowing down investment in its payer operations.

North Shore-LIJ launched its commercial health plan, CareConnect, in 2014. The company sells individual health policies on New York’s insurance exchange, and it also sells group plans to employers.

CareConnect has joined the growing ranks of provider-owned plans. Hospitals and health systems are encouraged to take on more risk-based payments. Consequently, many organizations are repeating history and starting their own health plans to control the premium dollars of their patient populations.

In the first half of 2015, North Shore-LIJ’s health insurance operations boomed. Premium revenue from CareConnect and the system’s Medicaid managed long-term-care plan increased more than three times, totaling $95.3 million in the first six months, according to the latest unaudited figures. CareConnect covered more than 26,000 members, as of June 30, a large jump from the 10,000 covered members at the same time in 2014.

However, the bottom line suffered. CareConnect and the Medicaid plan lost $12.4 million in first half of 2014, equating to a negative operating margin of 13%.

North Shore-LIJ CEO Michael Dowling told Modern Healthcare this year that insurance losses were “fully expected” and that becoming both a provider and payer was a long-term strategy.

“Having an insurance company becomes a huge catalyst in getting the whole organization to think differently about how we should be doing things,” Mr. Dowling said. “When you collect the premium dollar, you’re going to do all of the things a little bit differently than when you’re just paid fee-for-service, because of the alignment of the incentives.”

Executives said in a bondholder filing that “diversifying the North Shore-LIJ business model, including providing health insurance through NSLIJ CareConnect,” remains one of their top priorities.

North Shore-LIJ’s total revenue in the first half of 2014 increased 17% to $4.2 billion. Hospital, doctor and emergency room visits all increased across the board as North Shore-LIJ completed several community hospital transactions. The system’s operating surplus rose 38% to $52.7 million, putting its operating margin at 1.3%.

Bob Herman writes for Modern Healthcare, a sister publication of Business Insurance.