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Stanford preps insurance products for Bay Area tech employers

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Stanford Health Care, the Bay Area academic medical center, is entering the insurance market with a product that will be offered to Silicon Valley’s technology companies.

The Palo Alto, Calif.-based provider already covers its own employees through the Stanford Health Care Alliance, a narrow network plan that currently covers 15,000 lives. It will be offering the plan to two major high-tech employers starting next year, with two more employers coming on in 2018, said Chris Dawes, president and CEO of Stanford Children’s Health.

The total number of lives covered could be in the range of 50,000 to 60,000, he said.

“We recognized that more and more employers are concerned about their costs,” Mr. Dawes said. “They want high quality, and they want to manage their costs. It gave us an opportunity to learn how to manage that risk.”

Like most academic medical centers, Stanford is grappling with how to align its high-cost structure with a payment environment that’s increasingly focused on how to get more bang for the buck.

Blue Shield of California, the San Francisco-based health plan that’s the third-largest in the state, last year dropped Stanford from its 2016 individual and family plans’ exclusive PPO network.

“Stanford Health Care’s rates are among the most expensive in California, and its high costs have negatively impacted the affordability of health care for our PPO members,” Blue Shield wrote in a letter to members.

Representatives from the Health Care Alliance declined to comment on their strategy, noting that they’re still in the planning stages.

In preparation for its foray into the insurance market, Stanford has been building a larger network of providers, including in neighborhoods farther afield from Palo Alto.

Stanford’s Lucile Packard Children’s Hospital, for instance, is about 80% of the way toward its goal of creating access points within 10 miles of every Bay Area household. It has eight partnerships already in place and is exploring others. In 2012, for instance, it formed a joint venture with John Muir Health System, which expanded pediatric specialty services in the East Bay.

Stanford’s physician network includes six multispecialty medical centers and 60 primary care locations.

Packard doesn’t necessarily want to be the largest provider in the area, Dawes said, but needs to build cohesive network that will support the insurance plan. “If we hadn’t put that network in place, we couldn’t have offered that product,” he said.

Stanford Health Care also completed a merger last year with ValleyCare Health System, a single-hospital group located across the East Bay community of Pleasanton.

Beth Kutscher writes for Modern Healthcare, a sister publication of Business Insurance.