Kaiser Permanente is joining forces with Renown’s Health’s insurance arm to form Kaiser Permanente Nevada. Here’s what the deal entails.
Health care giant Kaiser Permanente is entering the Nevada market for the first time by partnering with a longtime health care network in Reno.
Renown Health announced the joint venture Wednesday with Kaiser Permanente, which will acquire a portion of Renown’s insurance arm, Hometown Health, to create Kaiser Permanente Nevada.
California-based Kaiser Permanente provides health care through hospitals and medical groups while also offering health insurance coverage.
Dr. Brian Erling, president and CEO of Renown, noted the venture will jointly own and operate a health insurance and outpatient care delivery system. Renown and Kaiser Permanente’s hospitals will remain separate, but people with Kaiser Permanente Nevada insurance will be able to use Kaiser facilities in California while enrollees in California can use Renown services in Northern Nevada.
Erling described the deal as a first for Kaiser Permanente.
“This joint venture model that we’ve put together … has not been done anywhere by Kaiser,” Erling told the Reno Gazette Journal. “They have a couple new innovative partnership models that they’ve done on the East Coast but they’ve never done anything like this.”
Expanding its services into Nevada has been a longtime goal for Kaiser Permanente, according to CEO Greg Adams.
“Our members, employers, physicians and community members have been asking us to provide our unique offering of value-based care in Nevada for some time,” Adams said.
“We will now have the opportunity to care for more people, help more employers offer coverage for their employees, and in collaboration with Renown Health, improve the health of this growing community.”
The partnership also takes advantage of the synergies between Renown and Kaiser Permanente, said Bethany Sexton, Hometown Health CEO.
“By working together, we hope to expand access to afford health insurance coverage (and) deliver more coordinated and innovative care,” Sexton said.
Why did Renown Health decide to partner with Kaiser Permanente?
For Renown Health, partnering with Kaiser Permanente was a way to stay in the health insurance game.
COVID-19 hit Renown’s Hometown Health insurance business — and provider-sponsored health plans in general — hard, according to Erling. A provider-sponsored health plan refers to insurance provided by a network that also delivers care.
The pandemic impacted Hometown Health’s medical loss ratio, which measures the percentage of premiums used on medical claims. The cost of pharmaceuticals saw a sharp increase, which Erling described as the most dramatic change that affected costs.
Erling pointed to the cost to cover Renown’s 8,000 employees, which was going up 8% to 10% a year, as an example of how much insurance costs were rising.
At the same time, membership numbers were falling significantly.
“Most provider-sponsored health plans across the country have really struggled coming out of the pandemic,” Erling said. “Our membership was over 150,000 members and right now we’re at 74,000, and in order to do what you want to do in that space, you really need scale.”
Scale is what Kaiser Permanente brings to the table. With approximately 13 million members, Kaiser brings negotiation and buying power, especially when it comes to things such as the cost of prescription drugs.
In fact, Kaiser Permanente’s buying power for pharmaceuticals was “way greater than … anybody that we entertained through the process,” according to Erling.
For Kaiser Permanente’s CEO, the partnership with Renown also has added personal meaning.
Earlier in his career, Adams worked as a nursing leader at Washoe Medical Center, which was the longtime name of Renown Regional Medical Center before it was changed in 2006.
“(It’s) wonderful to be back and to see the remarkable progress, incredible growth and innovation happening here today,” Adams said.
“This joint venture is a great opportunity to pair Renown Health’s strong local reputation with Kaiser Permanente’s value-based care model to deliver … high-quality and affordable care and coverage, close to home.”
What’s next for the Renown Health and Kaiser Permanente Nevada partnership?
Following the agreement between Renown Health and Kaiser Permanente, the venture now needs to gain approval from regulators.
“We’ll start our application process for regulatory approvals immediately,” Erling said.
“We do expect it to take several months at the state level. Once those approvals are received, then we’ll close the transaction.”
Gaining approval for Kaiser Permanente Nevada would cap what has been a long journey for Renown Health, which started the process to find an insurance partner two years ago. It took six months, with Renown ultimately choosing Kaiser Permanente. Both sides then spent 19 months ironing out a deal.
In addition to its large scale, Renown also picked Kaiser Permanente as a partner because it was a not-for-profit health care network, just like Renown.
“We were very focused that we wanted to do a partnership with a similar not-for-profit, mission-oriented organization so we didn’t send this proposal out to every health insurance company in the country,” Erling said. “We took a short list and sent the proposal out.”
Erling expects to see cost benefits from the partnership, which should translate to lower costs for those covered by the health plan.
“If you look just at the plans being offered on the (health insurance) exchange this year, there is significant growth across the board, including double-digit percentage growth in premium costs,” Erling said.
“And so you always have to kind of put it against what the rest of the market is doing, but we still expect significant savings for consumers.”
The partnership also allow for additional connections for those enrolled in Kaiser Permanente health plans through what’s called “visiting member access.”
If the partnership is approved, those in Hometown Health’s network in Northern Nevada can access care in markets where Kaiser Permanente operates such as California and Hawaii. Conversely, people covered by Kaiser Permanente can receive care in Renown’s hospitals in the Reno area.
While the deal goes through the integration process, Hometown Health customers will see no change through the 2026 plan year. Then sometime in 2027, plan options will start being offered that look a lot more like what you would expect from a traditional Kaiser plan, Erling said.
Erling also did not express any concerns about Kaiser Permanente potentially becoming a future competitor in health care delivery.
“We welcome them and are super excited that they’re coming into our market,” Erling said. “They will be in Nevada as a partner with Renown.”
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