‘We think long term there will be less need overall for hospital beds if we do it right’

The contentious—and litigious—relationship between Highmark Health and the UPMC health system is nearing an end. On June 30, 2019, a state-brokered, five-year consent decree comes to end, allowing the large Blue Cross and Blue Shield insurer and UPMC to go their own ways. With eyes fixed on the future, Highmark’s hospital arm, Allegheny Health Network, has been expanding. David Holmberg, CEO of Highmark Health and board chairman of Highmark, said the organization’s focus is on driving utilization to the right care setting and reducing costs for all constituents. He spoke with Modern Healthcare Managing Editor Matthew Weinstock. The following is an edited transcript.

Modern Healthcare: Let’s jump to a year-and-a-half from now. What does the world look like for Highmark, UPMC and patients in that community?

David Holmberg: Let’s start with, most importantly, the patients. I think the patients will have choice between two fine organizations. We’ve taken a different path than UPMC. We are building five new hospitals in neighborhoods much closer to where people live, the whole idea being that the majority of healthcare costs today are being driven by chronic disease, not accidents and infections, and so consequently, if you can move closer to where the patients are, you have a real opportunity to deliver care differently.

So we’re creating more access to care where you’ll have team-based primary care. It’s a different model than what exists today; you’ll have 24/7 emergency

care if needed. If somebody needs an infusion or needs observation overnight, we’ll be able to take care of them. Our objective will be to make sure that if somebody is really sick— they have a high-acuity need—that they’re going to get best-of-class care at one of our facilities. I think that’s different from what the other folks are doing where they are putting a $2 billion investment into a downtown location.

MH: How do these new hospitals fit into a model where more care is moving into the ambulatory space?

Holmberg: Our goal— we’ve said very clearly for Highmark Health and for the Allegheny Health Network—is to keep people out of the hospitals. If we do this right, we share in the success of keeping people healthy by helping people get better outcomes

by making sure they’re in the right sites of care and we share in the success with employers by making healthcare more affordable.

First, we have to build some of this capability. Long term, it will reduce the number of people who actually end up in hospitals because you won’t have as much need. And then the ones who are there, we want to make sure they get bestof-class care, whether it’s at our Women’s Center at West Penn in Pittsburgh or our heart program at Allegheny General or the trauma program at Allegheny General.

But if you’re having a gallbladder out and we can do it as a same-day patient, you don’t need to be in a hospital. Our data say people get better outcomes if they stay closer to home and have family support, and it’s more affordable for the individual as well as the employer.

MH: So do you view these five facilities as ambulatory centers? Are they limitedservice hospitals?

Holmberg: We call them neighborhood hospitals. They’ll have full emergency department capability—10 to 12 ED stations or rooms. And they’ll have typically 10 to 15 inpatient beds. Everything is designed from a consumer’s experience, so if they walk in the door and they don’t have a primary-care physician but they don’t need to be in the emergency room, we’re going to triage them to primary care so that they receive the right level of care.

A portion of it is outpatient. They’ll have imaging capability and testing capability and all the things that you need if you were going into an emergency room, but that capability will also be available to the primarycare physician. And that’s in combination with the success we’re already having with our ambulatory sites.

We think long term there will be less need overall for hospital beds if we do it right. And, frankly, if we get this right, this is the solution for rural medicine in Pennsylvania, West

Virginia and Delaware, and potentially for the country, where you have a lighter version and a more affordable and relevant version of what the community needs.

MH: How much of this is to fully differentiate yourself from UPMC? How much of it is being driven by that competitive relationship?

Holmberg: I would say 60% is driven by market dynamics and 40% is driven by the vision of what we think is in the future. Where I’m lucky is, unlike other markets, we have a highly competitive dynamic that’s happening and we have a very clear timeline for that to happen. That’s given us license to be bolder, to be more decisive and to build a differentiated healthcare system, both payer and provider, and to really be innovative.

MH: As you think about the contentious nature of the relationship, what does that do, in general, for a community, for the market you serve? Have there been any regrets along the way?

Holmberg: First of all, I think there are positives to it, and then there are certainly concerns. On the positive side, people have embraced and appreciated the fact that they now have more choice because of the investments we’ve made in building Allegheny Health Network. They are starting to see the value of an integrated approach where both the provision of care and the financing of care is together, and they are seeing that this competition is bringing new ideas and innovation to the table—for example, the neighborhood hospital strategy—and that’s having a real impact.

The downside to it is any time you have uncertainty, it creates confusion for people and it creates worry, and we’re not happy about that and we don’t like that. So our approach has been to focus on what we do differently and it’s based on what our customers— the employers, the patients, the clients, the individuals—have told us. We’re building what they have told us they want.

MH: What surprised you most about building an integrated model?

Holmberg: The complexity of past decisions. Whether it was bricks and mortar or policies or strategies, getting people to understand intellectually, as well as in their hearts, why we needed to go a different direction and what the value would be and how that would benefit people. We had to prove it to people.

I approached major decisionmakers and wanted to show them why our heart transplant program and our cardiac programs were best-ofclass and so highly ranked versus others. But instead of me talking about it, I said, “The only way I will meet with you is we will pick you up, and we’re going for a tour.” We went to Allegheny General. We went to our new 12th-floor Cardiac Intensive Care Center, which is as good and stateof-the-art as any in the country. I didn’t talk for 45 minutes. The physicians did all the talking. We went around, and when we were done, people said, “Now I get it. Now I understand.”

Rather than limit ourselves to our own thinking in our own provider health system at the Allegheny Health Network, we’ve taken the approach of, “Let’s partner with others and let’s bring the best ideas from around the world home to us, to Pittsburgh.” We’ve partnered with a variety of different folks and that’s all part of how we think we’re changing the game.

MH: You reference cost and we hear a lot about affordability these days. Who do you have in mind when you think about affordability?

Holmberg: I think affordability falls into three different buckets. One is the consumer. Over the past 10 years, consumers have been asked to pay more for their healthcare, whether it’s copays or out-of-pocket or high-deductible plans, and their expectations are starting to catch up with that. They expect that when they invest in healthcare, they have the same kinds of experiences they do in other forms of retail.

The second category is employers. One of the biggest ways you can ensure job creation is to make sure that benefits are affordable and that they deliver results that help people be more productive at home, work and play.

The third category is the government. The challenge we see in Washington is you’ve got some folks who would like to create more access to care, and then you have some folks who maybe would argue that it’s not sustainable and we should reduce taxes or tax more.

Affordability is about dealing with the real issue, which is the cost of care and how care is consumed. I think we would all agree that if we can create better access to care and to give more people the ability to have healthcare, that’s a good thing, but at what price?

So I think what we’re doing is providing a bridge for the government, a bridge for employers and a bridge for individuals to start finding that sweet spot where you can give access and create that, but you also make it more affordable.

Let me give you my example: the difference in reimbursements for an MRI. If you do it as an outpatient, it’s one price. If you do it inpatient, it’s another. If you do it in a high-acuity center, it may even be more. It’s everyone’s responsibility to get the patient to the right site of care for what their need is.

Obviously, for somebody who’s extremely sick or has been in an accident, being in the high-acuity, high-cost center may be the absolute right thing because of all the other things that go with that, but if you’re having your knee done and you are going to have it done as an outpatient, maybe the site that’s closest to home, that gives you the lowest deductible or makes it more affordable for the employer, is a better answer.

“Our approach has been to focus on what we do differently and it’s based on what our customers—the employers, the patients, the clients, the individuals—have told us.”