Prospectus: Why the time was right for Independent Health to affiliate with MVP Health Care

For one, Independent Health President and CEO Dr. Michael W. Cropp and MVP Health Care CEO Chris Del Vecchio have known each other for a long time. And the two executives had talked multiple times over the past four years about how MVP could work with Independent Health on pharmacy services, since the Amherst health plan boasts its own pharmacy benefit manager and specialty pharmacy.

"We were making progress on finding a way to make something happen in that space," Cropp told The Buffalo News. "But then, as we were looking at the future, what the industry's sort of confronting, I reached out to call Chris and say, 'You know, Chris, maybe we should talk about something bigger than just pharmacy. There's some real opportunities here.'"

That brief, initial call that got things rolling came April 14 as Del Vecchio was driving to Boston. Later, Cropp and Del Vecchio met in Skaneateles, near Syracuse, to talk about the future together.

More meetings followed in the months ahead between the two companies, leading up the announcement in the fall that Independent Health would join MVP's family of companies. The affiliation needs state regulatory approvals, which aren't expected until the fourth quarter of this year.

To Cropp, the affiliation is the right move for Independent Health for financial and strategic reasons. Like many regional health plans, Independent Health has struggled in recent years with rising medical expenses and skyrocketing pharmaceutical costs. 

When Cropp started at Independent Health in 1996, pharmacy was 7% of the insurers' medical spending. Now, he said, it's 30%.

Those challenges led Independent Health to record a net loss of about $193 million on revenues of $2.3 billion in 2023. Then in 2024, the health plan's net loss was $66 million on revenues of $2.5 billion.

And while the Medicaid space "has really been a huge challenge" for Independent Health in the past couple of years, Cropp said MVP has had more success in Medicaid in recent years, so it made sense to partner with an organization with expertise in areas where Independent Health has struggled. MVP is coming off a strong year in 2024 when it recorded a $508 million surplus on total revenue of $3.9 billion.

Further, as the health insurance industry continues to consolidate, MVP and Independent Health should benefit from having a broader geographic reach and member base. Combined, MVP and Independent Health will serve almost 1 million members with annual revenue of $7 billion.

That size would benefit the insurers and strengthen their bid if, for example, New York moves to competitively procure Medicaid managed care organizations in the years ahead. In that kind of bidding process, in which health insurers would compete for a limited number of managed care contracts, a geographically isolated health plan would be at a big disadvantage.

Over the years, Cropp said Independent Health explored three different partnerships with other health plans, including a prior strategic alliance with Albany health plan CDPHP as it sought to share practices and trim expenses.

But, Cropp said, conversations with other potential partners never got very far, because Independent Health officials "didn't feel the alignment of the values and the mission was strong enough."

He feels MVP is a strong fit in terms of vision and values. In addition, the two health plans have complementary geographies and capabilities, Cropp said. He insists that the affiliation between Independent Health and MVP is about much more than just combined scale.

"MVP respects Independent Health, and everything that that we've done, and they've talked about they want the RedShirt brand to be part of the full organization's brand," Cropp said, "and they know that between Independent Health and the Foundation, that we've created deep roots within the community and partnerships that are really important."

While it's still early, Cropp sees potential for growth in the pharmacy area. Independent Health subsidiary Pharmacy Benefit Dimensions and its specialty pharmacy, Reliance Rx, will play a big role in that.

Independent Health has had some success selling those services to other health plans, but Cropp believes Del Vecchio, a pharmacist by training, and his team "know how to commercialize that and take that to a whole other level."

"We built the capacity to be able to take on MVP's membership in PBD and Reliance," Cropp said. "The next phase is building the machine to take that out and sell it to other health plans that are tired of being gamed by the big three or four PBMs, and so I'm really excited about that."

Still, Independent Health and MVP will look for cost savings by combining some resources, meaning job cuts are possible. While MVP has 1,700 employees, Independent Health has about 1,600 workers when including its affiliate companies. 

Cropp said the exact organizational structure is still being worked on, though it will likely involve Independent Health and MVP Health Care existing as affiliated companies underneath the umbrella of a yet-to-be-defined parent organization. Further, Cropp said there's the possibility of a third entity under the umbrella that would provide back-office functions and support.

"Everybody's going to be worried about, 'Is my job going to be there?'" Cropp said. "And I wish I could look everybody in the face and say, 'You don't have to worry.' I can't, but I can say, if we continue to do all the right things, we'll grow, and then there will be opportunities and possibilities."

There will be challenges, of course. Bringing together two cultures is never easy, and Independent Health also will have to confront ongoing challenges in the industry and "continue to transform the business as if this deal is not going to happen," Cropp said.

Those challenges include the upcoming reduction in Medicaid funding, the loss of ACA health insurance subsidies that are forcing more people to become uninsured, and scaled-back government payments in Medicare Advantage, leading to fewer zero-premium product offerings for seniors.

Once the affiliation is complete, Cropp said he expects Independent Health will maintain "some strong continuity with some of the leadership" in Western New York because MVP understands the importance of relationships in the community.

"They want to build upon that and, in many ways, they want to take some of that DNA and move that in to the parent company as well," Cropp said. "So I think this bodes extremely well for Western New York."