Get­ting ready to man­age risk and com­pete with in­sur­ers

Modern Healthcare - - Q & A -

“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.

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