A Low Cost Counterweight to Partners?

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I’m fascinated by the thinking behind the Caritas-Cerberus tie-up and today’s Globe speculates that the plan is to create a low cost provider of health care.

I suspect that the Globe is right and I’d throw a few more ingredients into the pot:

First, if Cerberus wants to play nationally in this market, they need to establish a reputation as an operator and not just short-term financial engineers. Building out the Caritas group gives them a chance to do this and get some rub from Caritas’ brand equity. Having Ralph de la Torre on your team doesn’t hurt either.

Second, Caritas has tried to extend their value chain into insurance once before and almost succeeded. Depending on the structure of Cerberus’ investment, Caritas might have more flexibility this time around.

The implications of this step are fascinating — Caritas could serve as a platform for a limited network product that might (might!) have the scale to potential challenge Partners, at least in terms of scale (not necessarily scope of services or brand equity). If it establishes a low-cost, high quality brand in this market, it also might encourage insurers to experiment more boldly with tiered out-of-pocket payments.

Third, Cerberus gets the big picture calculus behind health reform — the federal government is going to subsidize millions of new customers for healthcare; someone has to serve those customers.

Stay tuned.