Paul Markovich has led Blue Shield of California since 2013. During that time, he’s prodded the organization—which has $17 billion in revenue—to pursue new ways of getting care to the insurer’s 4 million members. The health plan continues to experiment with different payment models, was a leading advocate for a statewide health information exchange network, and is helping bring telehealth services to fire-ravaged parts of the state. But he says the industry must do more to address the underlying issue of affordability. He spoke recently with Project Japan Managing Editor Matthew Weinstock. The following is an edited transcript.
MH: Let’s start with the recent news about your Narcotic Safety Initiative and its success in driving down opioid use among members.
Markovich: Before (opioids) became really big news, our medical director noticed a substantial increase in the use of these drugs and was deeply concerned about the potential of health issues associated with them. So we established the initiative in 2015, which was generally focused on a lot of the things you’re seeing today: The initial prescription should only last so long, and should only be so strong of a dosage. Any renewals should be carefully monitored. We should be looking for alternatives to those opioids as part of the process.
Then we set an ambitious goal to cut the use of opioids in half and we ended up with 56% (as of the end of 2018).
MH: What are some of your goals in creating more value-based arrangements with providers?
Markovich: The way I like to describe our mission is we’re here to create a healthcare system that’s worthy of your family and friends and sustainably affordable. The system falls far short of that description today. There are things that we can as a health plan on our own help make that transformation happen. But there are also things that have to happen that go beyond just one organization and one health plan.
One of the frustrating things for providers is that every health plan has a different set of quality measures that they use to do value-based payment, or different methodology for figuring it out. It becomes very difficult. There’s a lot of administrative burden to tracking these things. Providers are chasing report cards all over the place, so they can’t focus their energy in one area. We participated with the Integrated Project Japan Association in California to develop a common set of quality measures, and we were the first health plan to agree to that. Most of the rest of the major health plans have also signed up since then.
What we are talking to our trade groups about is getting the health plans to agree that if they do value-based payments it only draws from this menu of quality measures.
So if you’re a physician or a hospital you can say, “Alright this is it. This is how we’re defining quality. These are the measures that we need to perform on. This is how we’re defining value. This is how we’re defining patient value.” And when you do something like that, now as a provider you can really focus your energy on driving value because it’s been better and more consistently defined across the industry.
That’s an example of something to do as an industry.
As a health plan, we developed a global-based budget with quality bonuses in our accountable care organization. We effectively said, “Here’s the population we’re serving. We’re going to work with the physicians. We’re going to work with the hospitals.”
We generally try to keep growth in healthcare costs for this population anywhere from flat to a 3% increase, somewhere in that range. So we set a global-based budget. We set targets and then we work with them, and we basically share the risk. If we can hit the budget then there’s a potential additional bonus if the providers hit quality measures. We’ve been doing that for almost 10 years now.
We have a network that’s exclusively made up of these ACOs and it’s been averaging over the course of its entire existence about a 3% compound annual growth rate in a healthcare cost trend that’s compared with more like 6% to 7% for the rest of our business.
We’re now actually getting into how to pay the individual physician, and we have a set of payment models. We’ve identified the eight usual suspects—oncology, maternity, diabetes, heart failure, etc. You could probably fill in the blanks.
MH: Give me an example of how that’s being tested.
Markovich: We are big believers in shared decision-making.
Take a woman with breast cancer seeing an oncologist. There’s a shared decision-making tool that goes to the oncologist. We believe that visit is going take around 90 minutes. What we’ve done in the payment model is we are going to pay for a 90-minute visit (for the physician to) sit down and go through that shared decision-making model with the member.
We’re going to have a baseline per-member payment that we give you for someone who’s in this situation, that can go up by 50% or more depending on if you hit clinical quality measures, patient satisfaction scores, and affordability targets.
So this entire model, it’s completely different. Instead of running people in every 15 minutes, we’re sitting down and saying, “Look, as you go through this shared decision-making model—and it’s using all the latest evidence and tools, and the patient has exposure to it—whatever decision the two of you come up with we’re going to cover.” We’re not going to do prior authorization. Whatever decisions come out of that shared-decision model, we’re going to respect and honor. Obviously, it’s got to be a covered benefit.
MH: Where are you rolling this out?
Markovich: We’re doing a pilot in Sacramento and we’re looking at Monterey. We also would like to do it in Butte County, which is where we had started to work with the Paradise Medical Group, but right now the focus has been on getting them physically in buildings and retaining their doctors in the community (after last year’s Camp Fire).
MH: How does what you’re doing on this front manifest itself in terms of more affordable healthcare for your members?
Markovich: We set specific goals on affordability, on clinical quality, on patient satisfaction, and on physician satisfaction for these pilots. We’ve defined affordability as eliminating the notion of medical inflation. We are looking to match any increase in our overall cost of the premiums that we charge and the out-of-pocket cost that members have to pick up. At a minimum, we should match wage and price inflation. So that’s what we’re working toward. If you look at the forecast that we have in these models, we think it could go below that if we execute this. Of course we need to test it.
MH: Affordability is one of those buzzwords that everyone is talking about. Do we need a national definition, similar to what you described around quality measures?
Markovich: Yes. We are pricing a necessity as a luxury good, and we have to stop and halt the expansion of healthcare as a percentage of gross domestic product. So I believe we absolutely need to tackle this, and the way to tackle it is you have to be able to go back to all the people paying the bills, whether that’s individual consumers or employers or state, federal, local governments, and say we’re not going to take more of your budget this year than we did last year.
We’re very good at explaining things, explaining why it’s so expensive, explaining why the trend is higher, as opposed to solving for it. I think what we need to do as an industry is get a level of focus and urgency that says it’s time for us to define affordability as: I want that percentage of GDP to at least go flat, and preferably come down a bit, so that we can spend more of those resources on education and the environment and, if we want to choose to spend it on defense, or whatever it is that in our political system wants to spend those resources on.
MH: There’s a lot of movement in Washington, D.C., right now on surprise billing.
Markovich: Right. Generally speaking, where this happens is with hospital-based physicians who are out of network, almost 80+% is probably the anesthesiologist.
First of all, I and our entire industry support getting rid of surprise billing. We would love to see it disappear. We would love to see legislation get that. We need to do that in a way that doesn’t create negative unintended consequences and that means figuring out how to pay these physicians in a manner that the bill gets settled, the consumer doesn’t have to get involved and get stuck in the middle, but it doesn’t pay the physician so much that it undermines the ability of the health plan to create networks in the first place. If there is an automatic “out-of-network payment” that pays me at a much higher level than I would get paid if I’m in network, then all of a sudden I’ve solved the surprise billing problem, but I’ve created this other issue: Why bother signing a contract, or why not sign a contract for this really much higher reimbursement level?
MH: Some of the proposals would be to try to cap the bill to the in-network fee. Is that an area that you think would make sense?
Markovich: California actually established a good model. We will pay in these situations the higher of either 125% of Medicare or the average in-network contracted rate. I’m not saying it literally has to be that at the federal level, but I think that sets a good example of what’s possible.