There’s a risk that value-based payment ‘is more lip service than the real thing’
Since 2010, Dan Hilferty has served as president and CEO of Independence Blue Cross, a notfor-profit Blue Cross and Blue Shield insurer based in Philadelphia that serves nearly 10 million people in 24 states and the District of Columbia, including 2.5 million in southeastern Pennsylvania.
It’s part of Independence Health Group. He previously served as president of IBC’s health markets. Before that, he served as CEO of the AmeriHealth Mercy Family of Cos., a multistate Medicaid managed-care plan. Hilferty serves on the board of the Blue Cross and Blue Shield Association, chairing the association’s health policy and advocacy committee. He also serves on the executive committee of the America’s Health Insurance Plans board. Modern Healthcare reporter Bob Herman recently spoke with Hilferty about managing the health of Medicaid patients, building provider networks and moving forward with value-based payment. This is an edited transcript.
Modern Healthcare: Your subsidiary AmeriHealth Caritas was awarded a Medicaid managed-care contract in Iowa. How does Independence view the Medicaid market?
Dan Hilferty: Blue Cross/Blue Shield of Michigan is our national partner in responding to RFPs like those in Iowa, Michigan and Nebraska. We believe that with our expertise in managing this very complex population and working either alone or in partnership with the local Blue Cross plan, we can be very competitive.
MH: How is Independence managing the care for these complex patients?
Hilferty: We are very active from the start of a program in reaching out to each individual and family, making sure members get associated with a medical home and a primary-care physician. We are very active through the local schools, community centers and churches in providing comprehensive education opportunities.
MH: Why has Independence deployed tiered health plans for the commercial market, directing people toward lowercost providers through the different levels of cost-sharing?
Hilferty: It’s giving customers what they want and need in a health benefit. If someone chooses a tiered plan, it’s because they’re comfortable their provider network and the services they want or need are part of that tiered network. We, in turn, are able to develop quality measures and pay-for-performance models with that network that help us drive quality and reduce costs.
MH: What are the issues you face in contracting with providers that are not placed in the preferred tier?
Hilferty: Let’s take Medicare Advantage as an example. We said here’s the price point, and we went out to the provider network and said, “This is all we’re going to pay for this.” We were prepared for some providers to say no. We found there was such a cry from our membership to be part of the product that virtually every provider signed on. If the consumer speaks, the provider network will respond. The five-county Philadelphia area is a very provider-rich environment. We were able to put these networks together, and they were diverse enough that everybody is able to play if they want to play at a particular price point. If you’re in a region where there are fewer providers, it’s more difficult.
MH: What are some prescription drugs that have caused you cost concerns?
Hilferty: Clearly prescription drugs are outpacing medical trends, and we expect this to continue. If you look from a specialty-drug perspective, the number of products in the pipeline for FDA approval is in the hundreds. Take, for example, the significant increases we saw in hepatitis C drugs, especially Sovaldi, in 20132014. You multiply that across disease states and various health plan products, and it’s mindboggling to think as more of these drugs come on the market the impact it will have on insurers.
We think transparency is the key—that the drug companies, like us as health insurers and providers, should be held accountable to show the cost and the value they bring to the table.
MH: How does Independence look at value-based reimbursements, specifically capitation?
“Drug companies should be held accountable to show the cost and the value they bring to the table.”
Hilferty: We are a strong proponent of value-based contracting and pay-forperformance. We started several years ago. In any contract we did with individual primary-care and specialty clinicians and with providers as a whole, we built in a pay-for-performance model that dealt with meeting certain quality points and having agreed-upon care pathways. So that was the start.
This really gets to the importance of a robust base of data from the payer and the provider. By having real-time data in front of a clinician, connecting that back to the care pathway, and meeting certain quality and efficiency standards, the clinician has the ability to appropriately make more money. It’s the winwin mindset starting with the patient getting a better outcome, instead of the we-they, insurer-vs.-clinician mindset.
We decided we need to partner with primary-care physicians in a new way. Under our partnership with DaVita HealthCare Partners called Tandigm Health, we provide financial incentives based on quality.
MH: There was a commentary not long ago in the New England Journal of Medicine that people are paying lip service to value-based payment and not actually doing it. Is that true?
Hilferty: It’s a valid point. It’s logical that we should be going in that direction, but it takes time. The key thing is that robust base of data that tells a story about an individual’s history, or a population’s history, and what the path forward should be. We’re not totally there yet. We’re making tremendous strides. Until we truly get our arms around that, there is the risk that value-based reimbursement is more lip service than the real thing.
MH: How do you envision Philadelphia transforming healthcare-wise over the next five to 10 years?
Hilferty: The Independence Health Group, through the Independent Center for Health Care Innovation, put $50 million aside, and we’re investing in startups that we think can help us build a human-centered circle around our members. Our idea is that members can one-stop shop for all of their health insurance needs and maybe long-term care.
We created an incubator called Dreamit Health, in partnership with the University of Pennsylvania Health System, and invested about $1 million a year in it. We’re in our third year. The first year we selected 10 ideas or companies that were in the incubator stage. We brought them to Philadelphia, gave them money to understand how to start a business, gave them the provider and payer data they needed, and gave them mentoring contacts. We made it attractive for them to stay in Philadelphia. Of the roughly 28 that have been brought in to date, 15 are up and running in Philadelphia.
In addition, we and some of Philadelphia’s other healthcare, higher education and business institutions came together to create a fund to seek out health-related innovative companies that might be willing to move their operations here. We would like to create a buzz about the Philadelphia region as a Silicon Valley of healthcare innovation.