‘We’ve been a dis­rupter and in­no­va­tor in the mar­ket­place’

Modern Healthcare - - Q&A -

Un­like most of the in­sur­ance co-op­er­a­tives launched with Af­ford­able Care Act fund­ing, Mary­land’s Ev­er­green Health Co­op­er­a­tive is not only sur­viv­ing but turned a small profit on its 40,000 en­rolled mem­bers dur­ing the first quar­ter of 2016.

Mod­ern Health­care re­porter Bob Her­man spoke in June with CEO Dr. Peter Beilen­son, who served as Bal­ti­more’s health com­mis­sioner from 1992 to 2005, about how pub­lic health ap­proaches helped the co-op sur­vive its rocky start. The fol­low­ing is an edited ex­cerpt.

Mod­ern Health­care: You’ve writ­ten about the HBO se­ries “The Wire,” which takes place in Bal­ti­more. How is that rel­e­vant to the sit­u­a­tion in Bal­ti­more to­day, es­pe­cially in light of the Fred­die Gray sit­u­a­tion?

Dr. Peter Beilen­son: “The Wire” very ac­cu­rately por­trays the parts of Bal­ti­more, cer­tainly not all of Bal­ti­more, that are heav­ily hit by vi­o­lence, by drug of­fenses, by drug ad­dic­tion, all of which are re­lated to a lack of avail­able liv­able-wage jobs, a lack of af­ford­able qual­ity hous­ing and a lack of pub­lic schools that are pre­par­ing kids for the 21st cen­tury in­stead of the 1950s. My book, which was called Tap­ping into “The Wire,” ties a lot of the mes­sages of “The Wire,” which is the in­sti­tu­tions that are im­por­tant in ev­ery­day life—schools, hous­ing, po­lice—just aren’t work­ing well for a large chunk of the pop­u­la­tion.

MH: How is that rel­e­vant to what’s been go­ing on with the Fred­die Gray case?

Beilen­son: What the Fred­die Gray case highlights more than any­thing is that the war on drugs has been a com­plete fail­ure. It is pre­dom­i­nantly a war on poor peo­ple and peo­ple of color in in­ner cities.

The drug use is just as high if not higher in pri­vate schools in Bal­ti­more com­pared to the pub­lic schools in Bal­ti­more. It’s sim­i­lar among adults to a large de­gree. (But) drug deal­ing is done out in the open in the city, where there are a lot more po­lice of­fi­cers than in the coun­ties where there’s many fewer po­lice of­fi­cers, and drug use tends to be in­side the house.

The po­lice are not fo­cused on go­ing af­ter the high-level traf­fick­ers and the re­ally vi­o­lent of­fend­ers and get­ting the low-level ad­dicted folks into drug treat­ment. Fred­die Gray— I don’t want to dis­par­age him—but I be­lieve he was in­volved in ad­dic­tion and low-level drug trade. This is just an ex­am­ple of the po­lice pick­ing up some­one they know that’s in­volved in the trade and stick­ing him in the wagon. It hap­pens thou­sands of times a year.

MH: Has that per­spec­tive al­lowed your co­op­er­a­tive to be more suc­cess­ful than other co-ops?

Beilen­son: The rea­son that we started it is be­cause sev­eral of us came from the world of pub­lic health and had seen the prob­lems that cause peo­ple to be uninsured and not have qual­ity, af­ford­able care. So our mis­sion was to serve those par­tic­u­larly who would come to the ex­change and got sub­si­dies who pre­vi­ously would not have been able to af­ford health­care.

Un­for­tu­nately, the ex­change, the Trav­e­loc­ity, if you will, of health in­sur­ance in Mary­land crashed and burned in the first year, so we got very few peo­ple on the in­di­vid­ual ex­change. We ended up hav­ing a fair num­ber of small busi­nesses and now large busi­nesses work­ing with us.

We’re the only co-op in the coun­try that runs our own sys­tem of pri­mary-care of­fices, which have health coaches, so­cial work­ers and nurse prac­ti­tion­ers. Our doc­tors see half the pa­tients in a given day that nor­mally is done in a doc­tor’s of­fice be­cause we want to spend a lot more time with our pa­tients. We don’t pay fee-for-ser­vice, which is an in­cen­tive to do more un­nec­es­sary test­ing. In­stead, we pay salaries to our docs and use ev­i­dence­based medicine. So, we’re not only pro­vid­ing re­ally good health cov­er­age, but we also pro­vide pri­mary care.

MH: You lost about $11 mil­lion on roughly $84 mil­lion of net pre­mium rev­enue last year, but you had a de­cent med­i­cal­loss ra­tio. How would you char­ac­ter­ize Ev­er­green’s growth right now?

“No one, in­clud­ing CMS, knew how badly skewed this risk-ad­just­ment for­mula and method­ol­ogy would end up be­ing.”

Beilen­son: We have been prof­itable every sin­gle month of this year, so we are ac­tu­ally in great shape. We’re the most vi­able of the re­main­ing 10 co-ops left in the coun­try [ Ed­i­tor’s note: There are now nine], and ex­cept for this large risk-ad­just­ment charge, we’d clearly be turn­ing a profit this year. We’re al­ready at a mil­lion dol­lars in prof­its so far this year, and we will end up at $2 mil­lion to $3 mil­lion if we win the risk-ad­just­ment case that we’re fil­ing.

MH: How were you able to at­tract so many small­busi­ness own­ers to your com­pany?

Beilen­son: I don’t think we get any­body from the SHOP ex­change. We work with small groups, pre­dom­i­nantly through bro­kers. Mary­land is a very heav­ily bro­kered state, par­tic­u­larly in the small­group busi­ness. We have de­vel­oped re­la­tion­ships with them. We pro­vide re­ally good per­son­al­ized ser­vice. We have a great mem­ber ser­vices team that gives out their phone num­bers and reg­u­larly will an­swer with a real hu­man be­ing in­stead of do­ing a push but­ton thing where you never hear from any­body.

So, even when there are prob­lems, and we’ve had them, we’re able to han­dle them very quickly. And they know the per­son who is ac­tu­ally han­dling them. That’s been a real sell­ing point. We’re very com­pet­i­tive in our small group rates against CareFirst, which is the Blue Cross and Blue Shield be­he­moth here in Mary­land.

MH: Ev­er­green sued the fed­eral gov­ern­ment re­cently over what is called the ar­bi­trary and capri­cious risk-ad­just­ment pro­gram. What are the main points of con­tention?

Beilen­son: No one, in­clud­ing CMS, knew how badly skewed this risk-ad­just­ment for­mula and method­ol­ogy would end up be­ing. Let me just give you the three or four big­gest is­sues: No. 1, in or­der to get these “health­ier” or “sicker” car­ri­ers, you add up all the di­ag­nos­tic codes that your mem­bers have and av­er­age it out. Who­ever ends up with health­ier or sicker pa­tients, they trans­fer the payment. But in or­der to get a code, you have to see a doc­tor, and it has to be en­tered in your med­i­cal record dur­ing that cal­en­dar year.

So CareFirst has had pa­tients for years. They iden­tify di­a­bet­ics from the year be­fore and any­body else who has a chronic con­di­tion and makes sure they get them to the doc­tor the fol­low­ing year to get that code again. We had ab­so­lutely no way to deal with that be­cause we didn’t have pa­tients be­fore. That’s a huge ad­van­tage.

No. 2, we get pa­tients of­ten­times well into the year. If you are di­a­betic and we got you on Nov. 1, even if you are tak­ing in­sulin, which ob­vi­ously shows that you’re a di­a­betic, if you didn’t go to a doc­tor in those two months, which many peo­ple won’t, you ap­pear as a healthy per­son be­cause phar­macy is not counted.

Third, the grand­fa­ther plans had been al­lowed to ex­clude peo­ple with pre­ex­ist­ing con­di­tions. So they had a health­ier book of busi­ness that they were al­lowed to keep off the cal­cu­la­tion for risk ad­just­ment. That made their pop­u­la­tion look sicker than it re­ally is.

Fourth, for those of us who do value-based in­sur­ance de­sign, in our case we have a great prod­uct that gives di­a­bet­ics all the ev­i­dence-based prac­tices, tests, etc., that they need with­out any out-of-pocket costs. We bring peo­ple’s code down. In other words, we im­prove some­one from a com­pli­cated di­a­betic to an un­com­pli­cated di­a­betic. We’ve made our pop­u­la­tion health­ier be­cause we’ve in­vested in them. Yet we’re pun­ished by hav­ing to pay CareFirst be­cause we took bet­ter care of our pa­tients. It makes no sense.

MH: What is a bet­ter way to do risk ad­just­ment?

Beilen­son: We’re ad­vo­cat­ing ex­actly what the CMS came out for in 2018. They are now ad­vo­cat­ing for ex­actly what we do, which is to in­clude phar­macy data. That’s an easy way, no mat­ter when you get a patient dur­ing the year, to know what their di­ag­no­sis is.

They are go­ing to ac­count for par­tial-year en­roll­ment. They are go­ing to get rid of grand­fa­ther plans. They are ba­si­cally do­ing ev­ery­thing that we want, partly be­cause of pres­sure from us and other small new en­trants. But they’re do­ing it by 2018, which is too late.

We’ve asked for it in a year. The lawsuit was a last step for us, the last-ditch step. We’ve been talk­ing to them for a year.

MH: If the changes aren’t made, would Ev­er­green have to con­sider clos­ing?

Beilen­son: No. It will be a hit, but we can man­age it be­cause we’re in such good fi­nan­cial shape. There will def­i­nitely be some that will be hurt. There will def­i­nitely be some that go un­der.

MH: Congress has held sev­eral hear­ings on co-ops. Where do you see this pro­gram go­ing?

Beilen­son: It’s a sad tale in some ways. The co-ops that went down in the first year tended to have un­der­priced the in­di­vid­ual mar­ket. They got sicker pa­tients with pentup de­mand, so they bled out in claims. They had ex­pected risk-ad­just­ment re­ceiv­ables, which they didn’t get for the rea­sons that I have al­ready men­tioned.

Then they thought the risk cor­ri­dor pro­gram would come to the res­cue, but risk- cor­ri­dor was ob­vi­ously paid out at only 12 cents on the dol­lar. So they had huge losses, and they went out of busi­ness. Now, some large com­pa­nies also un­der­priced, the Blues here in Mary­land did as well, but ob­vi­ously they have a va­ri­ety of books of busi­ness and a huge, huge sur­plus, so they were able to sur­vive be­ing hit with the high cost of the in­di­vid­ual mar­ket­place.

The 10 that are re­main­ing, prob­a­bly half of them won’t make it. But we cer­tainly will, and there are prob­a­bly four or five that will come out of this. The re­main­ing co-ops want to do what we’re do­ing, which is run­ning pri­mary-care cen­ters, align­ing in­sur­ance with care. We’ve been a dis­rupter and in­no­va­tor in the mar­ket­place with our di­a­betic plan, which low­ers costs and low­ers premiums.

We con­sider our­selves the ag­ile tor­toise. We’re slow but steady, and that’s made a dif­fer­ence for us.

MH: Do you con­sider the pro­gram a suc­cess then?

Beilen­son: I’ll close with an anal­ogy. What ended up hap­pen­ing was as if a ven­ture cap­i­tal firm, in this case CMS, in­vested in 23 star­tups, in this case the co-ops, and did vir­tu­ally ev­ery­thing pos­si­ble in terms of bad ad­vice to lit­er­ally (cre­ate) ob­sta­cles, like not al­low­ing you to mar­ket your­self with fed­eral money in the first year and putting re­stric­tions on cap­i­tal—all of which they could have changed them­selves.

They ba­si­cally did ev­ery­thing pos­si­ble to crush their in­vest­ments so that they would not get a re­turn on in­vest­ment, which in this case is re­pay­ing tax­payer loans. It’s just in­sane. And it’s ac­tu­ally some­what of a sur­prise that five are go­ing to make it, be­cause it’s been the most poorly man­aged plan that I’ve seen in my 20 to 25 years in gov­ern­ment.

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