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BCBSA CFO Speaks to Conference Attendees About Transforming the Payer-Provider Relationship

June 18, 2013
by Rajiv Leventhal
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Two key cogs in the healthcare system need to continue to advance their relationship to improve value
Robert Kolodgy

One of the fundamental needs in today’s healthcare system is for its two core stakeholder segments—payers and providers—to work together collaboratively. The two sides are sharing goals such as better care coordination, and forming accountable care organizations (ACOs) and bundled-payment contracts, all with the intent of lowering costs and improving care.

Robert Kolodgy, senior vice president, finance, and CFO for Blue Cross Blue Shield Association (BCBSA), spoke in front of a large crowd on June 17 at the Healthcare Financial Management Association (HFMA) annual’s conference in Orlando, Fla., highlighting promising models of payer-provider collaboration and describing how business models will need to evolve on both the payer and provider sides.

“Now more than ever, it is imperative that payers and providers work together to improve value—particularly at a time when healthcare spending accounts for 18 percent of our nation’s gross domestic product (GDP), at $2.7 trillion, and when 30 percent of the dollars spent on care are directed toward ineffective, redundant, or harmful care,” Kolodgy said.

The Affordable Care Act (ACA) will affect every one of us in some way, Kolodgy said, particularly as an estimated 25 million people will be newly insured. “Somebody’s going to have to pay for these 25 million people to get coverage,” he said, adding that those who become newly insured under the ACA will generally be sicker than the average person with insurance coverage, and the benefits of expanding coverage will come with a cost that will be felt by providers, payers, and consumers.

The ACA was intended to increase access to affordable healthcare, and with that comes high expectations, said Kolodgy. “But if you read what is out there, expectations about what it actually will do vary widely. How many people will come into coverage? What will it cost? What will it cost for rest of us? The access part of the act is much more clear than affordability part.”

The solution for payers and providers to more effectively collaborate to improve value involves these four key starting points, Kolodgy said.

  • Improve access: “It takes education, and that’s something we need to get into our job descriptions. We need to lead in primary care.”
  • Improve quality: “You have to have evidence and you have to believe in it. Accept that it’s good, reasonable, and will achieve good outcomes. Both payers and providers can work together in promoting the use of evidence-based care protocols and in recognizing superior performance.”
  • Maintain affordability: Providers and payers should work together to design and implement new patient-centered care models, increase transparency for consumers, and develop innovative payment structures. Kolodgy gave two of examples of patient-centered medical homes supported by BCBSA, one of which in Michigan has saved $155 million in one year. “Now we have to figure out how to replicate them,” he said.
  • Promote individual accountability: Empower consumers with information that enables them to make more informed healthcare choices—and make them accountable for their own actions in regard to their health, Kolodgy said. “If I want to be unhealthy or dangerous, at a base level, there ought to be economic consequences for that.”

Kolodgy gave an example of a member of a Blues plan who had diabetes, weighed 350 pounds, and smoked a pack of cigarettes a day. One day, the patient’s primary care provider asked him/her, “what do you do when you’re not in this office?” The conversation got to a point where the patient had greater access to the physician and the office, and became more knowledgeable and engaged. Since that dialogue, the patient lost 100 pounds and stopped smoking, boasted Kolodgy.

At the end of the day, payers and providers should recognize that they have a common purpose and common goals, and should determine the terms of engagement for collaboration. “They must find a way to work together, and there has to be trust,” said Kolodgy. “If you don’t trust me, you don’t want to work with me, and vice versa. We have to prove each other’s credibility.”