Washington, D.C., Area Health Care Market Sticks to Fee for Service; Dips Toe into Value-Based Payment
- Moderately competitive health plan market. The region’s leading health plan, CareFirst BlueCross BlueShield, is dominant in the small-group and nongroup (individual) segments. Three national insurers—UnitedHealth Group, Aetna, and Cigna—compete strongly in the large-group segment. Kaiser Permanente, an integrated delivery system with a closed, limited-provider network, has market share in the high-single digits but may be poised to grow.
- Complex hospital market with multiple overlapping submarkets. The hospital sector is characterized by significant geographic segmentation, especially between northern Virginia—where Inova Health System is dominant—and the rest of the region. Geographic boundaries are more porous between the District and Maryland. Besides Inova, the only other system with a major regional presence is MedStar Health. The major hospitals are all expanding their ambulatory care networks, with head-to-head competition especially heating up in affluent and fast-growing northern Virginia communities.
- Increased physician consolidation, though small, independent practices persist. The physician market has undergone substantial consolidation during the past decade, with hospital-owned groups and two large physician-owned groups recruiting aggressively and growing dramatically. Still, many physicians remain in small, independent practice, with a small but noticeable subset of physicians in the most affluent submarkets choosing some form of concierge medicine. For the much larger number of private-practice primary care physicians not taking the concierge route, participating in CareFirst’s patient-centered medical home program has made remaining independent more viable.
- Safety net generally strong but lacks cohesion. Overall, the region has a broad array of safety-net providers, including numerous large community health centers focusing on primary care for low-income people. The region has no dedicated safety-net hospital; much low-income inpatient care is provided by mainstream hospitals that play a significant safety-net role because of their location, size, and/or range of services. Despite strong safety-net providers and programs, the region lacks significant collaboration among safety-net organizations and between those organizations and local governments.
With a strong, stable economy anchored by the federal government, a large high-wage professional-services sector, and unemployment well below the national average, the National Capital Region has one of the most affluent, educated, and well-insured populations in the United States. The region includes the District of Columbia; Montgomery and Prince George ’ s counties in Maryland; and Arlington, Fairfax, Loudoun, and Prince William counties in Northern Virginia. Despite the region ’ s overall affluence, significant pockets of poverty exist, most notably in Washington, D.C., and Prince George ’ s County.
The federal government sets a relatively high benchmark for health benefits, but many employers—including law firms, lobbying firms, high-end government contractors, and others competing for high-wage workers—outdo the government in benefit richness. Most employers take a conservative approach to health benefits; they are less likely to self-insure and less aggressive in seeking cost-containment innovations than comparably-sized employers in other markets.
Health care leaders acknowledge the inevitable shift from fee-for-service to value-based payment and the need for their organizations to develop population-management capabilities. Yet, most hospitals continue to emphasize fee-for-service strategies in an updated hub-and-spoke model—with newer ambulatory venues such as freestanding emergency department and urgent care centers strategically located to attract more patients—especially affluent, well-insured patients—to a particular system. In some cases, however, hospitals are using these new ambulatory networks to position themselves for population health management under value-based payment. This persistence of fee-for-service strategies likely stems from the commercial insurance market’s “pass-through” environment that enables provider rate increases to be passed on to employers through premium increases because the market has many employers able to absorb the additional costs and no large, influential employers pushing for cost-containment innovations.