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Innovation Health: A Joint Venture Approach to Payer-Provider Integration in Virginia

In 2012, Aetna and Inova, a not-for-profit health system in Virginia, formed a joint venture health plan: Innovation Health. The health plan is an entirely new entity owned jointly by both organizations. Its network emphasizes Inova’s providers.

By integrating payer and provider, Innovation Health has the potential to more effectively manage population health, a central capacity in a value-based system. In addition to aligning incentives through shared risks and rewards, the partnership facilitates greater care coordination. Aetna, for example, is able to support Inova in its abilities to track patient health and exchange information between physicians and across settings of care.

Innovation Health’s version of integration—a growing trend—is only one approach among many. Aetna has several private-label health plan ventures in which it still performs the traditional functions of the insurer and the health system is simply the preferred provider. There are also an increasing number of payer-provider mergers and acquisitions, and instances of health systems launching their own health plans. Each model presents distinct opportunities and challenges associated with features such as market reception, regulatory approval, compliance with applicable laws and regulation, resource intensity, and competition.

Concerns about competition between products of the individual partners and those of the new health plan are a potential barrier to partnership with the joint venture model. In this example, Innovation Health only is available in Northern Virginia. On and off the Exchange, Aetna plans are not offered in the same locality, but remain available in other parts of the state. What lies ahead if Inova chooses to expand geographically? Furthermore, Innovation Health only sells commercial and Medicare Advantage plans. As to other lines of business, Inova owns INTotal Health (formerly known as Amerigroup Virginia), a Medicaid managed care plan it purchased the same year it partnered with Aetna.  Are economies of scale best optimized with Inova operating two plans with separate lines of business?

This interesting joint venture approach to payer-provider integration may be  suited to markets in which the insurance company partner is seeking new pathways. At the time the venture was announced, Aetna had approximately 600,000 members across Virginia while Inova was providing care to more than 1.1 million residents of Northern Virginia, annually.

Rachel Landauer also contributed to this article.

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume IV, Number 119
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About this Author

Eric Klein, Legal Specialist, Sheppard Mullin, national healthcare practice
Partner

Eric Klein leads the 95 attorney national healthcare practice, and is a partner in the Century City office, of Sheppard Mullin Richter & Hampton LLP, a full service AmLaw Global 100 law firm with offices throughout California, New York, Chicago, Washington, D.C., London, Brussels, Beijing, Seoul and Shanghai. With over thirty years of practical legal and business experience, his practice focuses on the healthcare, technology and related industries. Known in the business community for his creative solutions and deal-making ability, Eric uses deep industry knowledge, entrepreneurial...

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