Fundamental Enablers: Optima Health President Michael M. Dudley says not-for-profits compete on historical strengths of quality, local engagement

February 1, 2007

As the managed care industry continues to consolidate, not-for-profit and provider-sponsored plans haven't lost their niche in the marketplace. They compete on demonstrated quality and the added value of community accessibility, which would, on the surface, seem to be exactly what politicians and healthcare advocates are begging for.

As the managed care industry continues to consolidate, not-for-profit and provider-sponsored plans haven't lost their niche in the marketplace. They compete on demonstrated quality and the added value of community accessibility, which would, on the surface, seem to be exactly what politicians and healthcare advocates are begging for.

"There was a time when not-for-profits were the majority in the early 1970s and early 1980s," Dudley says. "Federal government funding sources promoted not-for-profit health plans like HMOs and so forth, but by the late '80s and early '90s, access to capital became very important. Senior executive recruitment and retention has become easier in the for-profit world perhaps. But now that the not-for-profit is more the minority, there still are many of us that are very strong, very stable and doing well even in a world that's dominated by for-profits."

Fundamental Conclusions

"I can remember fondly when we introduced the HMO to the medical staff of what was then Norfolk General Hospital and Leigh Hospital-we only had two hospitals in the system then-and they decided to take a vote," says Sentara Healthcare CEO David L. Bernd. "They voted 96 to six against starting the HMO, so it was an auspicious beginning."

He says today Optima creates a synergy that Sentara might not otherwise have. Because the integrated organization is at risk for 100% of the premium dollar, it is forced to have the strategic discipline to make well-balanced decisions in medical management as well as revenue management.

The Alliance for Advancing Nonprofit Healthcare often cites the high quality rankings among nonprofit plans by the National Committee for Quality Assurance (NCQA) and other published reports, but the alliance's study in 2004 also concluded that existing nonprofit health plans are financially healthy with lower operating margins; spend more on patient care and less on administrative costs; and provide more social benefits to their communities.