Steward Health Care System continued to reshape the Massachusetts health care market yesterday by announcing the creation of a health insurance program designed to be 15 to 30 percent less expensive than comparable plans in the market.

Steward Chairman and Chief Executive Officer Ralph de la Torre told the AIM Executive Forum that creation of Steward Community Choice represents an important step toward helping employers and consumers control the soaring cost of health insurance. The new health plan will also position Steward as one of the major players in a market moving from fee-for-service payment models to global payments and integrated care organizations.

Steward, the second largest hospital network in the commonwealth, will offer its insurance through Tufts Health Plan. Members will be required to obtain medical care at one of Steward’s eight hospitals, with pediatric patients and adult patients requiring specialized care being referred to Massachusetts General Hospital or Brigham & Women’s Hospital in Boston.

The plan is expected to be available to businesses effective January 1.

“The big deal with this plan is that  integration and community utilization will save you money,” de la Torre told more than 300 executives at the Executive Forum.

“We need to provide a solution for the escalating cost of health care.”

De la Torre said the new plan will closely track quality and customer satisfaction to ensure that members receive good medical care. The Steward Health system is already integrating an electronic medical record to improve efficiency and health management.

He told the Executive Forum that the new health plan is part of a seven-year plan by Steward to improve efficiency, control utilization and control total medical costs. The organization has spent the past two years spending hundreds of millions of dollars to upgrade its hospital facilities and restructure its relationships with physicians.

Steward, owned by the private equity firm Cerberus Capital, will be the largest, but not the first Massachusetts hospital system to venture into the health insurance business. Baystate Health of Springfield has owned insurer Health New England for several years.

In the past eight months, Steward has acquired Merrimack Valley Hospital in Haverhill and Nashoba Valley Medical Center in Ayer. The company has also signed purchase agreements for five additional hospitals – Morton Hospital and Medical Center in Taunton; Landmark Medical Center in Woonsocket, Rhode Island; Rehabilitation Hospital of Rhode Island in North Smithfield; Quincy Medical Center in Quincy; and Saints Medical Center in Lowell.

Steward facilities now total more than four million square feet and the company has committed to $270 million in construction during the next five years. Total investment in facility upgrades and renovations will hit $260 by the end of 2011.

De la Torre says control of health insurance costs is a critical part of the economic future of the commonwealth.

“Massachusetts small businesses are the engines of our state’s economy and our best potential source of new jobs. However, small businesses have been crippled by the constantly escalating cost of providing health insurance to their employees. By creating a comprehensive, benefit rich product at a reduced price, we hope to provide relief to businesses that are struggling to find a way to maintain their health insurance and reinvest in their businesses,” he said.

De la Torre shared several observations about the health insurance market:

• Generals always fight the last war instead of the next war. In health care, the last war is provider rates, the next war is utilization.
• Hospitals and doctors control some elements of utilization, such as eliminating repetitive and unnecessary tests, but only society can address long-term utilization issues such as how much care to spend on people at the end of their lives.
• Fully integrated, community-based health systems provide more efficiency and lower costs than pure phyisician and hospital groups.
• Hospital systems much use good data to convince doctors, especially independent practitioners, to buy into efforts to improve quality and provide value.
• Shortfalls in payments from government programs such as Medicare and Medicaid are shifted onto employers and others who buy private health insurance.