Something doesn't add up

Something doesn'Â’t add up

Fallon Community Heath Plan's growth strategy as described in yesterday's Boston Globe--- seems wise and differentiated: avoid the high priced academic medical centers in Boston in favor of high quality, low cost community hospitals. With health care premiums already high and rising fast, and with the increased availability of hospital quality data –it seems like an opportune time for Fallon's value proposition. In fact, it'’s the same strategy Charlie Baker at Harvard Pilgrim would love to follow but can't –because it would be too painful for Harvard's image to drop the big teaching hospitals.

So how is Fallon's grand plan working out? Results are underwhelming. Despite Fallon's assertion that community hospital prices are half that of academic facilities, Fallon's premiums are only 10 percent lower than its competitors’. And Fallon has failed to attract members –it has only 172,000--- virtually unchanged from 10 years ago. Meanwhile Blue Cross Blue Shield has close to 3 million.

Maybe the problem is that Fallon lacks the economies of scale needed to gain substantial price concessions and reduce the per member administrative overhead. If Harvard Pilgrim acquired Fallon it could offer Fallon'Â’s community based product while driving down costs