How Integrated Delivery Systems Drive Financial Stability

Lessons on Diversification and Scale from the 2/20 Club

Health systems of all varieties continue to experience financial challenges from shifting market headwinds, new/large/innovative competition, regulatory uncertainty, and most recently, a national and worldwide pandemic.

As providers look for opportunities to financially recover and stabilize, those systems with a diversified revenue stream portfolio are better positioned to weather market downturns. More specifically, health systems with direct access to the insurance premium dollar through provider-sponsored health plans (PSHPs) exhibit greater financial stability and revenue predictability.

Yet, the solution to financial stability is not quite that simple.

Incorporating (or merging) new businesses into a provider portfolio adds complexity, and PSHPs are not always immediately (or inevitably) successful. Into September, the tumultuous conditions created by COVID-19 stalled or dismantled multiple transactions where providers eyed expanding their business, including some where PSHPs were a critical component to the arrangement.

However, health systems navigating successfully through these systemic shocks have multiple levers available to them to deliver high-quality care while balancing strategic and financial goals.

12 of the most advanced integrated delivery systems have several success indicators with one overarching commonality.

Prior to the pandemic, we began evaluating the structural components and performance of providers with PSHPs, with a specific lens on integrated delivery systems (IDSs). Our analysis of 12 of the most advanced IDSs found that each organization is a member of what we have deemed the “2/20 Club” with at least $2 billion in enterprise revenue, 20% of which is generated by their health plans.

This piece lays out our observations of the 2/20 Club, which providers should be mindful of as they evaluate their structures, portfolios, and redesign strategies in the new post-COVID-19 normal.

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