Anthem Blue Cross and seven competing hospital systems in Southern California are joining forces to establish a new health plan offering, Vivity.^[1]  Operating with a combined 14 hospitals and approximately 6,000 physicians, the venture has already announced its first major customer: the State of California’s pension fund manager, the California Public Employees’ Retirement System (CalPERS).

One of the more interesting features of the integrated delivery network is that it consists of seven separate health systems, each with its own physician strategies in place. The affiliation is by contract, making it distinct from both the Kaiser single system strategy and that of integration through acquisition. Vivity’s eight member organizations will share what remains after medical and administrative expenses are deducted from premium revenue, be it profits or losses that are generated. Under the agreement, the health systems must provide care at a price that is at or below actual cost. The health systems must also meet and maintain certain quality standards.

With success hinging on shared savings, will this arrangement more closely align payor and provider parties in the transition towards a system of value-based health care? Will the approach obviate the reimbursement-driven adversarial relationship plaguing, for example, contract negotiations between Anthem Blue Cross and Stanford Health Care in Northern California? The contract between Anthem and Stanford expired this past month as negotiations over a new agreement reached an impasse. According to news reports, approximately 10,000 enrollees are affected by this termination. The events resemble a similar situation from 2011, when several months passed before a new contract was accepted.

At the same time, Vivity’s rigorous reliance on cost control (while maintaining quality standards) indicates potential challenges. If some of the health systems are not sufficiently able to control costs, it could be a losing scenario for all. Participating providers will be charging less than they otherwise would be, but will not receive the anticipated reward in the form of shared savings. Moreover, there is no guarantee the Vivity health plan will be able to attract enough customer volume to offset the lower prices offered by the hospital systems.

No one said the transition from a volume-based reimbursement system to a value-based one would be clear-cut or easy. Still, whether Vivity thrives or not, it will be an interesting venture to watch.

This article was written with contributions from Rachel Landauer.

_{[1] The hospital systems involved are: Cedars-Sinai, Good Samaritan Hospital, Huntington Memorial Hospital, MemorialCare Health System, Torrance Memorial Medical Center, and UCLA Health.}