April 2011

Executive Summary

Grand Valley Health Plan has served the greater Grand Rapids, Michigan, area for nearly 30 years as a regional, for-profit integrated delivery system, specializing in primary care with a guiding focus on wellness and prevention. Though it is a small plan with an enrollment of fewer than 8,000 members, the staff-model HMO has earned national distinction for health care innovation and quality. It is regarded as one of America’s “Best Health Insurance Plans,” ranked #4, for two consecutive years, by U.S. News & World Report/National Committee for Quality Assurance (NCQA) for consumer experience, prevention, and treatment.

Team-based primary care is critical in managing patient health, as reflected by Grand Valley’s HEDIS achievements.
Though Grand Valley is a very small-scale health plan and delivery system, it has achieved some of the best results in the nation. A team approach to primary care allows patients to have a high level of access at a low cost of care. This “coordinated” care enables the provision of more preventative care than patients would experience elsewhere and the avoidance of unnecessary specialists and procedures.

Mental/behavioral health services should not be overlooked as an essential component of high-quality, cost-effective care.
Grand Valley has for many years embedded mental/behavioral health services into the delivery of primary care. On-site “Health Coaches” are available on demand during primary care visits and are a critical tool in managing/preventing medical conditions and minimizing specialty referrals and other medical interventions.

It is not necessary to run a hospital or employ specialists to run an integrated delivery system.
Though Grand Valley Health Plan is at risk for all of a patient’s health care needs, it has built a delivery system heavily focused on primary care. It pays per diem rates to contracted specialists who are closely aligned with the primary care teams and approach, and it has arrangements to admit patients to local hospitals. “The hospital is the most inefficient unit,” said Grand Valley’s CEO, Ron Palmer. Grand Valley has not been impaired by not owning hospitals or specialists, as reflected by its stellar quality results in managing their patients’ health care.

Being a non-profit is not a key factor in successful integration.
Grand Valley staff feel that being a for-profit or non-profit organization is irrelevant to the ability to successfully integrate. What the organization views as important are investors and board leaders who share a long-term perspective of delivering high-quality integrated care, rather than a short-term focus on stock price.

It is possible to run a small-scale health plan well, though there is a minimum threshold.
Grand Valley was running a robust and financially sustainable health plan for many years, though in recent years, the crises in the local economy have brought membership so low, the health plan is running at a loss. At 10,000 members or below, leaders say it is possible to run an effective delivery system but quite risky on the insurance side (though they use re-insurance). At 15,000 members, cost efficiencies would return to the organization, and at 20,000 members, insurance risk would be better distributed. It is striking that these are far smaller numbers than many policymakers have deemed necessary to effectively run an integrated delivery system.

Medical Tourism can be practiced within the United States.
Grand Valley Health Plan’s system is facing consolidation in its local market of specialist groups and hospitals. Members of the organization felt in some cases that patients were being offered services where the price was too high or the quality too uncertain. Grand Valley has started designing pathways of care that involve sending patients out of their local market to centers of excellence in other states for second opinions and treatment. In some cases, Grand Valley is receiving better pricing or bundled pricing commitments at institutions with a far higher frequency of performing complex procedures and having more proven quality outcomes than the local offering.

Even with optimal management of health and prevention, worrisome population health trends are difficult to reverse.
Grand Valley is among the best in the nation in managing conditions like diabetes and heart disease. However, despite multiple decades of prevention efforts and a high percentage of members who have stayed in the system for many years, Grand Valley staff are not seeing a lower incidence of obesity or diabetes in their patient population. This raises issues for whether any health interventions can truly “bend the curve” on health care costs in terms of lowering the level of health care needs across the broader population.


About the case study series
Disruptive innovations in health care have the potential to decrease costs while improving both the quality and accessibility of care. This paper is part of a series of case studies that uses disruptive innovation theory to examine integrated delivery systems and aims to identify the critical factors necessary to achieve many of the desired quality, cost, and access improvements called for in current reform proposals. By providing a historical and strategic analysis of integrated fixed-fee providers, this project hopes to accelerate the adoption of disruptive innovations throughout the health care delivery system.

Funding for this case study series was provided by a grant from the Robert Wood Johnson Foundation’s Pioneer Portfolio, which supports innovative ideas that may lead to significant breakthroughs in the future of health care. The authors also thank the participating health systems and interview subjects for their cooperation and assistance.


  • Vineeta Vijayaraghavan
    Vineeta Vijayaraghavan

    Prior to joining the Institute, Vineeta served as Engagement Manager at the consulting firm Katzenbach Partners, helping Fortune 500 health care clients achieve strategic, operating, and organizational improvements. She was also a Research Fellow at Harvard Business School, creating cases and conducting research focused on issues of Organizational Development. She received her MBA from Harvard Business School.

  • Mina Katsis
    Mina Katsis