Getting ready to manage risk and compete with insurers
“Everybody likes to talk about moving from volume to value, but they’re two completely different business models.”
Michael Rowan is chief operating officer and one of two new presidents of Catholic Health Initiatives,
one of the nation’s largest not-for-profit health systems. Englewood, Colo.-based CHI has 89 hospitals in 18 states and more than $21 billion in assets. The system’s recent deals included two health plan acquisitions in Washington state and Arkansas. Rowan joined CHI in 2004. He previously was a hospital executive in Michigan, Ohio, Florida and Georgia. Modern Healthcare reporter Melanie Evans spoke with Rowan about CHI’s expansion plans, why it has two presidents, its experience with the Obamacare exchanges and its growing push into the insurance business. The following is an edited excerpt.
Modern Healthcare: You’ve made a number of acquisitions in the past few years in Washington, Texas and Nebraska, and you’ve got a deal pending in North Dakota. Why expand so rapidly?
Michael Rowan: First, as we prepare for population health management and more importantly the risk and insurance component of it, we’ve built capabilities in infrastructure. It’s important to be able to spread that infrastructure across a larger base. Second, while CHI has a large component of our healthcare system in midsized organizations and in rural areas, there’s more profitability sometimes in some of the major metropolitan areas. Some of our acquisitions have been in places like Houston and Seattle, where profitability tends to be a bit higher, to balance out those rural health facilities.
MH: What challenges do those acquisitions bring?
Rowan: Part of the challenge is integration into CHI. We’ve been successful with integration over the past several years because we have programs, services and systems that we have standardized across the organization. There’s a bandwidth issue of making sure that we can bring all of that into CHI. And then there’s the larger cultural issue of helping some organizations that haven’t been part of a larger national system become acquainted with the mentality and philosophy of being part of a nationwide operating company.
MH: You were recently named one of two CHI presidents. Why reorganize the top jobs at CHI, and what does your new role entail?
Rowan: We’re large, we’re acquiring, and we’re evolving into new lines of business. Our CEO has found that he spends more and more of his time external to the organization. So we said now is probably the right time for him to become primarily an external person serving as our CEO rather than president of our organization with responsibility for operations. We moved to the concept of two presidents. I’m responsible for healthcare delivery, and my colleague is responsible for many of our new business lines and for creating standardization and centralization around our back-office functions.
MH: How actively did CHI participate in the Obamacare insurance exchange plans, and what demand have you seen during the enrollment period?
Rowan: CHI is open to participating in the exchanges. But in the various markets we’re in, we haven’t seen that much which has developed out of it. We believe we’re going to see much more activity on the private exchange side. We’re going directly to employers to contract for providing services for their employees. More major employers are beginning to think about moving away from providing health insurance themselves. We see that as probably the biggest thing that’s going to happen. Realistically, however, CHI has a lot of facilities in markets where we’re a safety net facility, and we believe down the road we will clearly see more managed Medicaid, more managed Medicare and more people on the exchanges. But we haven’t seen that big tidal wave yet.
MH: Did you enter into Obamacare exchanges with narrow network plans?
Rowan: We’ve had conversations with payers, but there hasn’t been that much that has developed in
most of our markets. We’ve got nearly 100,000 employees and dependents around the country, and we’re starting a few experiments where we’re developing narrow networks for our own employees. For the past five years, we’ve managed to keep medical cost inflation down to about 1.5% for our own employees.
MH: To what degree is CHI involved in alternative payment models such as accountable care organizations and bundled payment, and what are the biggest challenges in successfully managing risk?
Rowan: Across the country we’re involved in many small experiments around bundled payments, working with our physicians. We’ve placed clinically integrated networks in each of our markets in partnership with independent physicians. So we’re gaining traction. But again, we haven’t seen the tidal wave in terms of shift. Everybody likes to talk about moving from volume to value, but they’re two completely different business models, with different sets of incentives and different required skill sets. Our biggest challenge is helping our partner physicians understand what it means and putting that infrastructure in place.
MH: CHI has entered into the insurance market with plans to expand. Do you expect acquisitions this year? How rapidly do you anticipate insurance market growth?
Rowan: This past year CHI made a real commitment to population health management. We believe it’s the future and we’ve got to learn to be good at it. I discussed what we’re doing with our own employees in terms of narrow networks. Then there is the whole challenge of Medicare Advantage plans, which we believe are a low-risk means of getting into the insurance business. We purchased an Advantage plan called Soundpath in South Seattle. We’re having conversations with two or three other Advantage plans around the country. Our goal is not so much to buy an Advantage plan for a specific market, but to bring in the skill sets and infrastructure to use across all of our markets. There will be some more acquisitions this year, both in terms of Advantage plans and building out our provider and facility networks in our markets.
MH: What might you be able to offer employers that traditional insurers can’t?
Rowan: We can maybe eliminate some administrative costs because we have facilities and we have a growing network of employed providers that we believe we can incentivize to be more focused on value. It’s one thing to be an insurer and say we can put a network together. It’s another thing to have a narrow network purposely built for population health management.
MH: Does that put you in competition with insurers?
Rowan: I think it potentially does. There may be opportunities where we recognize that insurers have certain skill sets and we could work in partnership with them. We don’t want to suggest that we think we’ll be as proficient as insurers in the insurance business in a couple of years.