‘There is tremen­dous profit-tak­ing go­ing on in health­care’

Modern Healthcare - - Q & A -

Since 2004, Dr. Michael Cropp has served as pres­i­dent and CEO of In­de­pen­dent Health, a not-for-profit health in­surer based in Buf­falo, N.Y., with 2014 rev­enue of about $1.8 bil­lion.

The plan serves nearly 400,000 mem­bers in western New York state, in­clud­ing about 92,000 Medi­care Ad­van­tage mem­bers. It also owns a phar­macy ben­e­fit man­age­ment com­pany, Phar­macy Ben­e­fit Di­men­sions, and a spe­cialty phar­macy dis­tri­bu­tion com­pany called Re­liance Rx. Cropp serves on the boards of Amer­ica’s Health In­sur­ance Plans and the Al­liance of Com­mu­nity Health Plans, and is found­ing chair­man of GO Bike Buf­falo, which works to cre­ate sus­tain­able trans­porta­tion op­tions. Mod­ern Health­care reporter Bob Her­man re­cently spoke with Cropp about sur­prise med­i­cal bills, how his plan re­duced pre­mi­ums this year and his views of pre­scrip­tion drug prices. This is an edited tran­script.

Mod­ern Health­care: New York state has reg­u­lated sur­prise med­i­cal bills in­volv­ing out-of-net­work charges. How can in­sur­ers, hos­pi­tals and physi­cians re­solve th­ese types of billing is­sues?

Dr. Michael Cropp: We see less of this in our re­gion. Part of that is be­cause about 95% of lo­cal physi­cians are par­tic­i­pat­ing with us. We work closely with our hos­pi­tals and physi­cians, so there are few op­por­tu­ni­ties for peo­ple to end up be­ing cared for by some­body who is not a par­tic­i­pat­ing provider. When one of our mem­bers ends up in a sit­u­a­tion where they were treated by a non­par­tic­i­pat­ing provider they had no abil­ity to im­pact, we go to bat for the mem­ber. We hold them harm­less and will, in some cases, go di­rectly to the provider and get them to ac­cept our rates.

We’re see­ing more of the sur­prise bill sit­u­a­tion take place when there is a group of providers that may be part of a na­tional or­ga­ni­za­tion that doesn’t quite un­der­stand the lo­cal dy­namic.

MH: Has In­de­pen­dent Health cre­ated nar­row provider net­work plans?

Cropp: We have both a com­mer­cial and a Medi­care Ad­van­tage prod­uct with a se­lect net­work. We have iden­ti­fied high­er­per­form­ing pri­mary-care prac­tices to be the base of the net­work. We’ve worked col­lab­o­ra­tively with th­ese prac­tices to en­hance ac­cess to care for our mem­bers, to demon­strate that they’re pro­vid­ing more con­sis­tent qual­ity in terms of preven­tion, and in treat­ment of com­mon con­di­tions, and they’re also more ef­fi­cient in their use of resources. That ef­fi­ciency trans­lates into lower pre­mi­ums.

When in­di­vid­ual Medi­care ben­e­fi­cia­ries see the op­por­tu­nity to get greater value in terms of less ex­pense out of their pocket, boy, they’ll make that call.

MH: What do you mean by high-per­form­ing?

Cropp: It starts with mak­ing sure th­ese prac­tices are avail­able to their pa­tients when the pa­tients need them. This in­cludes more ad­vanced sched­ul­ing sys­tems and be­ing able to pro­vide e-mail and phone con­sul­ta­tions, so that peo­ple can get sim­ple things taken care of eas­ily with­out an of­fice visit. It also in­cludes the stan­dard qual­ity met­rics on can­cer screen­ing, dis­ease preven­tion and ev­i­dence­based prac­tices for treat­ing chronic con­di­tions.

MH: How are Medi­care Ad­van­tage and the Af­ford­able Care Act open en­roll­ments shap­ing up for 2016?

Cropp: With Medi­care, we have had re­ally good growth over the past few years. We now rep­re­sent 55% of the man­aged Medi­care mar­ket in our mar­kets, and we ex­pect we will be com­pet­i­tive again this year be­cause our pre­mi­ums have gen­er­ally been the most af­ford­able and the ben­e­fits quite de­sir­able. We have a zero-dol­lar premium plan, prob­a­bly the only lo­cal one that’s out there right now.

Our rep­u­ta­tion for ser­vice and car­ing has served us well in terms of the growth in the Medi­care mar­ket. On the com­mer­cial side, large group is ba­si­cally ex­pe­ri­ence-rated and we have tended to do well in terms of our ex­pe­ri­ence there. We’re ex­pect­ing an­other solid year. In small group, our rates have ac­tu­ally gone down. So we’re ex­pected to be very com­pet­i­tive in the small­group mar­ket for this ope­nen­roll­ment pe­riod.

On the in­di­vid­ual ex­change, our rates went down con­sid­er­ably, so we ex­pect to be quite com­pet­i­tive. There are prob­a­bly about 10,000 mem­bers of the Health

Re­pub­lic co-op plan, which is shut­ting down. We an­tic­i­pate we’ll get a pretty hefty share of that group.

MH: How were you able to re­duce your pre­mi­ums, and what hap­pened with Health Re­pub­lic?

Cropp: We worked closely with our physi­cians on per­for­mance and qual­ity. We’ve al­ways felt that if you fo­cus on qual­ity, costs will fol­low. That clearly has played out for us.

On Health Re­pub­lic, I think what hap­pened was they rolled the dice and an­tic­i­pated that they were go­ing to get a much younger, health­ier pop­u­la­tion than they ac­tu­ally got. That’s why they ended up pric­ing their prod­ucts 40% be­low the rea­son­able-low pre­mi­ums in our mar­ket.

MH: Does that il­lus­trate how dif­fi­cult it is to start a health in­sur­ance plan?

Cropp: It’s go­ing to be in­ter­est­ing to watch as hos­pi­tals de­cide to get into the in­sur­ance busi­ness and see how they will do, be­cause it’s not an easy busi­ness. They call it the risk busi­ness for a rea­son.

MH: Do you view cap­i­ta­tion as an ef­fec­tive al­ter­na­tive to fee-for-ser­vice?

Cropp: Cap­i­ta­tion can help to es­tab­lish that frame­work of ac­count­abil­ity. But cap­i­ta­tion runs the risk of un­der­uti­liza­tion. If you’re not fully un­der­stand­ing how to mon­i­tor for the ef­fects of un­der­uti­liza­tion, and where to in­vest to en­hance uti­liza­tion for the things you want to see more of, cap­i­ta­tion can fail.

For our pri­mary-care physi­cians, we’ve moved to a blended pay­ment model, where we pay them fees for those ser­vices that have proven ef­fec­tive in help­ing to either pre­vent dis­eases or bet­ter man­age chronic con­di­tions. The rest of the money to pri­mary-care physi­cians flows in a pre­pay­ment tied to the ill­ness bur­den of their prac­tice. That al­lows them to pro­vide the e-mail, tele­phonic and nurse con­sul­ta­tions that will help peo­ple get the in­for­ma­tion and care they need more ef­fi­ciently. We also have gain-shar­ing, so that when the physi­cians demon­strate they meet high qual­ity stan­dards in terms of pre­ven­tive ser­vices and treat­ment of chronic con­di­tions, and prove to us that they’re not un­der­uti­liz­ing ser­vices, they can share in some of the sav­ings.

MH: Is it safe to say that fee-for-ser­vice medicine is never go­ing to truly go away?

Cropp: I think it’s safe to say that. When you re­al­ize that no pay­ment model is per­fect, and you think about what you want to in­cen­tivize and re­ward, and that there are some ser­vices you want to keep gen­er­at­ing vol­ume on, fee for ser­vice won’t go away com­pletely.

MH: Which of the prod­ucts you of­fer has been the most chal­leng­ing, and which of­fers the most financial prom­ise?

Cropp: The an­swer to both ques­tions is the same— Medi­care Ad­van­tage. It has pre­sented the great­est chal­lenge, be­cause in the short term, the gov­ern­ment has cut back on the amount of fund­ing go­ing to plans. In cer­tain ar­eas that started out as rel­a­tively lower re­im­burse­ment re­gions, such as western New York, those cut­backs are dif­fi­cult ad­just­ments to make. But at the same time, Medi­care Ad­van­tage rep­re­sents the big­gest op­por­tu­nity, be­cause there are ef­fi­cien­cies that can be brought to bear to im­prove the health of the Medi­care pop­u­la­tion and squeeze out some of the waste in the health­care sys­tem.

MH: What’s your take on high drug prices?

Cropp: It’s rapidly com­ing to a cri­sis point where it’s the sin­gle big­gest driver of the cost trend. So a dif­fer­ent na­tional ap­proach has to be thought through. What’s go­ing on now is un­con­scionable and un­sus­tain­able when you see the generic price drug in­creases. One of the ad­van­tages of hav­ing our own phar­macy ben­e­fit man­age­ment com­pany and spe­cialty drug com­pany is the abil­ity to work closely with the physi­cians to make sure we’ve got align­ment be­tween our for­mu­lary, our pur­chas­ing power, our use of the right med­i­ca­tions, and min­i­miz­ing the waste that oc­curs when peo­ple don’t ad­here to their med­i­ca­tions.

MH: Are there cer­tain drugs whose prices con­cern you the most?

Cropp: Two are hep­ati­tis C drugs and the new choles­terol agents. In ad­di­tion, mul­ti­ple scle­ro­sis drugs rep­re­sent a sig­nif­i­cant chal­lenge be­cause they’ve been around for a while and you should see the prices fall­ing, but it’s ex­actly the op­po­site. Then you’ve got the other spot con­di­tions like the new cys­tic fi­bro­sis drug that costs $300,000 a year. And you of­ten will see blood re­place­ment prod­ucts for he­mo­philia that can cost in the mil­lions of dol­lars a year.

MH: How has health in­sur­ance changed from when you were a prac­tic­ing fam­ily physi­cian and not an in­sur­ance ex­ec­u­tive?

Cropp: The power of in­for­ma­tion has trans­formed the industry. When I prac­ticed, ev­ery pa­tient was unique. You never took a step back to see what your prac­tice vol­ume was like for cer­tain dis­eases. You didn’t prac­tice team­work.

Now, with the in­for­ma­tion that we have avail­able to us, the in­sur­ance com­pany can be­come a pow­er­ful and im­por­tant part­ner in help­ing physi­cians un­der­stand what their pop­u­la­tion looks like, how well they’re do­ing com­pared with the ev­i­den­tiary ba­sis for the con­di­tions they’re treat­ing, and bring­ing resources to bear in terms of case man­agers and other tools to help physi­cians get bet­ter re­sults.

MH: How prob­lem­atic is it to man­age all that in­for­ma­tion in terms of data se­cu­rity?

Cropp: It can be sig­nif­i­cantly prob­lem­atic. It’s one of the things that keeps me awake some nights. We have a very ro­bust in­for­ma­tion se­cu­rity team, and we’re con­stantly test­ing our­selves to eval­u­ate the ac­ces­si­bil­ity of our in­for­ma­tion. It’s clearly an area of tech­nol­ogy that’s go­ing to re­quire sig­nif­i­cant in­vest­ment on the part of plans and prac­tices.

MH: What prob­lem in health­care do you think de­serves more at­ten­tion?

Cropp: There is tremen­dous profit-tak­ing go­ing on in health­care, with the phar­ma­ceu­ti­cal industry be­ing a prime ex­am­ple. There are many lay­ers that get cre­ated be­cause of the sys­tem’s frag­men­ta­tion. You’ve got for-profit tech­nol­ogy play­ers try­ing to help physi­cian prac­tices deal with some of the com­plex­ity. They prom­ise to “re­lieve” the physi­cian of the bur­den of do­ing that work—but for a fee. That’s in­vis­i­ble to the pub­lic. But when you see Gold­man Sachs and oth­ers tak­ing a sig­nif­i­cant in­ter­est in pro­vid­ing ser­vices to the health­care industry, you know there is fu­ture profit that’s there to be taken.

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