Can Blue Cross of North Carolina Help to Reshape Its State’s Healthcare Landscape? | Mark Hagland | Healthcare Blogs Skip to content Skip to navigation

Can Blue Cross of North Carolina Help to Reshape Its State’s Healthcare Landscape?

July 31, 2018
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Remarks made by Patrick Conway, M.D. this spring point to some of the opportunities—and profound challenges—facing the shift towards a value-based healthcare system in North Carolina

One of the more fascinating discussions of this spring that I was able to report on took place at the HLTH Conference, held at the Aria Resort in Las Vegas in early May. On Monday, May 7, I was able to attend a session that included Patrick Conway, M.D., the president and CEO of the Durham-based Blue Cross and Blue Shield of North Carolina (BCNC), and who had previously served as the Chief Medical Officer, Deputy Administrator, and Director of the Center for Medicare and Medicaid Innovation (CMMI), a division of the Centers for Medicare and Medicaid Services (CMS). Dr. Conway was interviewed onstage by Annie Lamont, managing partner at Oak HC/FT, a Greenwich, Conn.-based venture capital fund.

In addition to discussing his accomplishments at CMMI, Dr. Conway discussed at some length the payer-provider landscape in North Carolina right now. “Isn’t it true that five large multi-hospital systems dominate the state?” Lamont asked him. “Yes,” Conway responded, “five systems have the vast bulk of the market. And we’re looking at a new model, where” patient care organizations can partner more fully with Blue Cross North Carolina. “We’re saying, you can take this alternative pathway with us. And we’ll jointly be accountable for the total quality and cost of care. And we want you to go into two-sided risk. And we’re wondering, should we turn off all prior authorization? And documentation other than for risk coding and STARS measures, we won’t worry about how you document. And for people in the audience, those kinds of partnerships are very exciting, because you’ve now got a provider and payer that are no longer locked into rigid rules, but where you can innovate on quality and customer experience,” he added.

Meanwhile, Lamont asked, “How might the Blue Cross and Blue Shield Association be able to help facilitate healthcare system change among all the Blues plans, and beyond?” “I think the Blues system has a lot of potential, if we move past the traditional health insurance system,” Conway said. “The beauty is that we insure 100 million people—nearly as many as CMS. does And it’s mission-driven. And we have leaders like Mark Ganz [CEO of the Portland, Ore.-based Cambia Health, the parent company to four regional health plans] and Paul Markovich [president and CEO of the Sacramento-based Blue Shield of California], who really want to drive the system. The question is how you think about innovation, data and analytics, the customer experience, investments beyond the traditional ones, and think beyond being a traditional insurer.”

Later on in the interview, Lamont said, “You come in quickly and want change to happen fast in North Carolina. As you think about the things that can make the most change, I know you want to influence primary care. What are your thoughts about that” “I’d say a few things,” Conway said. “First, I’d reference our high-level goals as an organization: we talk about better care and outcomes, at lower cost, and with better service and experience. Buckets: working deep partnerships with providers, risk, etc. Second,” he said, “I’d talk about convenience: 24/7 access, telehealth-enabled, a real focus on higher quality and lower cost. And we’re like Medicare: we spend less than 10 percent of our costs on primary care, yet primary care physicians control most of the costs.”

“How do you do that—incent patients to show up in primary care?” Lamont asked. “First, there’s basic segmentation that has to take place in terms of Medicare, Medicaid, and commercial plan members,” in terms of thinking about how best to manage care and services for distinct populations, Conway said. And then, the providers who want to focus on discrete populations, are a factor as well, in planning, he said. “Some providers are involved in concierge-type care, which we’re looking at; other potential partners want to care for the sickest of the sick. There are different enablement capabilities,” and different levels of interest among different providers in terms of seeking to serve specific populations and sub-populations, he said.

“How do you define healthcare quality?” Lamont asked. “I was responsible for most of the measures from the federal government,” Conway said, “and always tried to move towards true outcomes measures rather than process measures, including patient-reported outcomes—process measures only if they have a real tie to outcomes measures. And then experience measures. I think healthcare, like other services, should have experience measures. And then I think about the total cost of care.”

Meanwhile, what about the proposed mergers and/or business alliances involving CVS and Aetna, Walmart and Humana, and Amazon/Berkshire Hathaway/JP Morgan Chase, that have emerged in the past few months? Lamont asked. “What’s your perspective?” “North Carolina is an interesting market, we’ve got every major health insurer,” Conway noted. “On the integration point, they all vary a bit. CVS-Aetna—can you actually integrate well and get the full value out of that relationship? But it’s got a PBM play and an integration play to it. Interesting. Walmart-Humana—is it actually real? But I view all of these things as overall positive; [the very creation of disruptive new alliances] forces change. In terms of the Amazon/Berkshire Hathaway/ JP Morgan Chase announcement, my biggest take with that is, they’re so upset with the current system that they want to disrupt it; and my reaction is, we should listen. Because they’re identifying a real problem.”

Rethinking market change in a health system-dominated state

I honestly found so much of what Dr. Conway told Annie Lamont about the North Carolina regional healthcare market (which itself is, of course, an amalgam of various metropolitan and other markets within the state) to be quite fascinating. With the major metropolitan areas in North Carolina dominated by a small number of relatively very large multi-hospital systems, it’s not going to be easy to force clinical transformation and value-based transformation in that state, even as Blue Cross Blue Shield of North Carolina dominates the market to some extent on the health insurer side.

Indeed, Blue Cross Blue Shield of North Carolina itself recently sponsored a study of the state’s health insurance landscape. And the insurer stated on its website last year that “A recent study showed that North Carolina pays more for health care than all the other states. Why is that? It’s a pretty simple question. Of course, when it comes to health care, simple questions often have complicated answers. But let’s take a look at some of the big-picture reasons that contribute to consumers paying more for health care here. Our state has large regions with only a few major health care providers. Some areas like Western North Carolina are dominated by only one hospital system. That lack of competition not only drives up the cost of care but also makes it much more difficult for insurers to negotiate lower prices with hospitals.”

Further, the health plan stated on its website, “The reverse is also true. For example, the Raleigh-Durham-Chapel Hill area is served by Duke Health, UNC Health Care and WakeMed Health Services. According to research by the Brookings Institution, that competition has resulted in the Triangle boasting some of the most affordable health care in the state. Unfortunately, North Carolinians aren’t as healthy as the rest of the nation. That’s especially true of our children, which doesn’t bode well for healthcare costs in the future. Obesity-related issues like diabetes and heart disease are major problems in our state. These conditions often call for the long-term use of expensive prescription medicines, not to mention costly medical testing and procedures. On top of that, nearly one-in-five North Carolinians is a smoker, which is higher than the national average of about 17.5 percent.”

And the study on which those statements were based, “A Study of Affordable Care Act competitiveness in North Carolina,” by Mark A. Hall of Wake Forest University, stated this: “Sources consistently said that health insurers’ potential entry into the market and geographic coverage are driven by provider contracting. North Carolina is considered to have fairly consolidated provider markets, as shown in the map below. Until a few years ago, Blue Cross included a “most favored nation” clause in its provider contracts. It required providers to give Blue Cross their best discount, but Blue Cross no longer does so and state law now forbids this. Providers in some parts of the state are still reluctant to give favorable discounts to Blue Cross competitors, several interview sources said. Sources also said that, considering the strong brand recognition that Blue Cross enjoys, it is not sufficient for competing carriers to simply match Blue Cross pricing; competitors need to offer prices that are lower to attract significant enrollment.”

What’s more, Professor Hall stated in the report, “Aetna and UnitedHealthcare were able to achieve competitive provider contracts in two ways. Aetna partnered with major health systems in several metropolitan markets to offer cobranded plans, such as with Duke Medical Center in the Raleigh area or the Carolinas Healthcare System in Charlotte. UnitedHealthcare sought risk-sharing arrangements of different types with providers throughout the state, including some accountable care organizations (ACOs). Also, UnitedHealthcare offered only a closed-network gatekeeper health maintenance organization (HMO) model in the individual market and no point-of-service or preferred provider organization (PPO) option. Cigna entered the Raleigh-area market for 2017 by offering a narrow network based on providers affiliated with the University of North Carolina.”

So what’s the bottom line here? It’s this: complexity. There is a dominant health insurer in North Carolina, but because of the dominance of individual, multi-hospital-based health systems in their individual metropolitan markets, hospitals have tremendous clout in North Carolina. So Dr. Conway and his colleagues at Blue Cross Blue Shield of North Carolina have proposed a “third way” type of collaboration—what he called in his interview at HLTH, an “alternative pathway” in which that insurer, and individual hospital-based health systems, agreeing to “jointly be accountable for the total quality and cost of care.”

That certainly is a reasonable proposition. What remains to be seen is the extent to which hospital-based health system leaders will take it upon themselves to participate in such arrangements. Only time will tell; yet one would think that any forward-thinking health system leaders would find themselves open to the prospect of such arrangements, in order to prepare for the nationwide value-based healthcare system that’s beginning to emerge.

And the North Carolina statewide market is absolutely one of the healthcare markets to watch, in the coming months and few years, because the pace at which it moves into change will also indicate the pace at which the nationwide U.S. healthcare market shifts towards value.

Frankly, my honest guess is that change will take place more slowly than one might hope, in North Carolina, because hospital-based health systems have far less incentive to shift quickly towards risk-based contracts. They have the market power to resist such arrangements, and their cultures have not yet developed towards the more advanced cultures of markets like San Diego, Minneapolis, or Cincinnati.

So only time will tell; but it will be important to watch North Carolina healthcare evolve, for clues as to how U.S. healthcare will evolve forward more generally. And the next few years will absolutely be a pivotal period of time in that regard.





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Should Physicians and HIT Leaders Worry about the Implications of the Walgreens/Microsoft Deal?

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As architect Daniel Burnham once said, “Make no little plans”; the leaders of the Walgreens/Microsoft alliance, like so many others, certainly are thinking big these days
architect Daniel Burnham

Nearly every day, it seems, new business combinations are announced that are threatening to alter the landscape of U.S. healthcare forever. CVS’s acquisition of Aetna, completed last November; the announcement a year ago now that the executives of Amazon, Berkshire Hathaway, and JPMorgan Chase & Co. were launching a broad (if not well defined) initiative to improve consumer satisfaction and reduce costs for their employees; Cigna’s acquisition just last month of pharmacy benefit management (PBM) company Express Scripts; and Amazon’s acquisition last summer of online pharmacy company PillPack.

Every one of those business deals represents a disruptive move in U.S. healthcare, with unalike “species” of organizations combining with one another. And now, the retail drugstore giant  Walgreens Boots Alliance Inc. and Microsoft Corp. are coming together in yet another disruptive venture. As Managing Editor Rajiv Leventhal wrote in an article on Tuesday, the corporations “are joining forces on a major seven-year healthcare partnership that will aim to ‘deliver innovative platforms that enable next-generation health networks, integrated digital-physical experiences and care management solutions.’” As he wrote, “The companies announced today that they will combine the power of Microsoft Azure, Microsoft’s cloud and AI (artificial intelligence) platform, healthcare investments, and new retail solutions with WBA’s customer reach, volume of locations, and outpatient healthcare services to accomplish their goals: to make healthcare delivery more personal, affordable and accessible.”

As Leventhal noted in his report, “While innovation in healthcare has occurred in pockets, officials of the two companies believe that ‘there is both a need and an opportunity to fully integrate the system, ultimately making healthcare more convenient to people through data-driven insights.’” Further, he noted, “As part of the strategic partnership, the companies have committed to a multiyear research and development (R&D) investment to build healthcare solutions, improve health outcomes and lower the cost of care. This investment will include funding, subject-matter experts, technology and tools, officials noted in the announcement. The companies will also explore the potential to establish joint innovation centers in key markets. Additionally, this year, WBA will pilot up to 12 store-in-store ‘digital health corners” aimed at the merchandising and sale of select healthcare-related hardware and devices.

“This gap creates an opportunity for the pharmacist to help monitor the patients’ health and prompt the patient to receive preventative care in the retail clinic or through a virtual care visit. Using an enterprise health cloud, like Azure, you create a more connected ecosystem so that we can share that data with the patient’s additional providers, track outcomes, and intervene earlier when an issue arises,” Microsoft CEO Satya Nadella said in a statement Tuesday.

And, Leventhal wrote, “Notably, the companies will also work on building an ecosystem of participating organizations to better connect consumers, providers—including Walgreens and Boots pharmacists—so that major healthcare delivery network participation will provide the opportunity for people to seamlessly engage in WBA healthcare solutions and acute care providers all within a single platform.”

Speaking to the difference between retail pharmacies and traditional care providers, Forrester analyst Arielle Trzcinski said in a statement emailed to the press that “[R]etail pharmacies offer an opportunity to engage with the patient much more frequently than at an office visit, giving an example of how chronic care patients see their pharmacist frequently, while some figures indicate that the average diabetic patient sees his or her provider once every six months.”

The implications of all of this are, of course, huge. For one thing, if one were to ask the average patient/healthcare consumer with whom they interacted more, doubtless, the vast majority would cite their retail pharmacists, rather than their primary care physicians. What’s more, what happens if Walgreens is able to follow through, as CVS also intends to do, in creating minute clinics in retail pharmacy locations? The impact could be revolutionary.

Indeed, it’s no secret that many patients are dissatisfied with the cumbersome, challenging processes around accessing primary and specialty care in the U.S. healthcare system. Simply accessing a timely appointment often proves to be a major hassle; and encounters around needed follow-ups and around questions to doctors and nurses often turn out to be such a hassle that many patients simply give up, with the result of medication non-compliance and other issues.

So what will happen if Walgreens, like CVS, manages to achieve success with one or more elements of this initiative? Those could include enhanced continuum of care for patients, especially those with chronic diseases; improved communication among all care delivery stakeholders; and enhanced patient/consumer satisfaction.

A few stakeholder groups should be paying particular attention here, including practicing physicians and healthcare IT leaders. For practicing physicians, could anyone deny that this business initiative, along with the others mentioned above, should be disconcerting at the very least? Already, patients needing relatively immediate medical attention, are turning en masse to urgent care centers, as both health systems and health insurers are working to cut down on the volume of emergency department visits, which are tremendously expensive, and which burden the healthcare delivery system in ways that are not sustainable. But now, with both Walgreens/Microsoft and CVS/Aetna, is anyone denying that the era of pretty-close-to-immediate medical attention is on the horizon?

The reality is that, while most patients like their primary care physicians and are satisfied with their care overall, strong majorities, in polls, continue to complain about poor service, bad communication, and delays accessing care and accessing follow-up support. What happens when most decent-sized Walgreens and CVS drugstores are staffed up with PCPs or advanced practice nurses, to handle the colds, coughs, flus, strep throats, and minor skin and digestive issues that could easily be handled by such service offerings?

One of the core policy issues here is that the U.S. healthcare payment system remains largely predicated on primary care physicians physically touching patients in order to get paid. Yes, telehealth services are expanding daily; but in most situations, patients still need to go through the awkward, inconvenient, sometimes even-arduous process of scheduling an appointment, using some form of transportation to get to that appointment, and waiting in a crowded physician office, in order to access primary care.  But in 2019, when GrubHub can deliver one’s banh mi Vietnamese sandwich to one’s home, and Amazon is sending everything from books to clothing to furniture to God-knows what, directly to people’s doors, how much longer will healthcare consumers continue to be patient with the glacial pace of care delivery change in U.S. healthcare?

Meanwhile, healthcare IT leaders will inevitably find themselves somewhat behind a proverbial eight-ball on all this, caught between the intensifying demands on the part of practicing physicians, especially primary care physicians, for full clinical IT support for their practices, and constant business changes, including merger-and-acquisition activity in their own organizations that is continuously scrambling their long-term planning.

So we’re seeing both business and technology changing, and changing quickly, with numerous examples already of industry-disruptive business combinations, and technology advancing to the point where previously unimagined breakthroughs are now imaginable. For example, Walgreens and Microsoft noted that, “Through this agreement, Microsoft becomes WBA’s strategic cloud provider, and WBA plans to migrate the majority of the company’s IT infrastructure onto Microsoft Azure,” as corporate officials put it. And “Microsoft also plans to roll out Microsoft 365 to more than 380,000 Walgreens employees and stores globally.” And, to make things just that more intriguing, the announcement quoted Stefano Pessina, executive vice chairman and CEO of the Walgreens corporation, as stating that “WBA will work with Microsoft to harness the information that exists between payors and healthcare providers to leverage, in the interest of patients and with their consent, our extraordinary network of accessible and convenient locations to deliver new innovations, greater value and better health outcomes in health care systems across the world.”

As renowned Chicago architect Daniel Burnham so famously said, “Make no little plans; they have no magic to stir men's blood and probably themselves will not be realized.” There’s no question that the senior leaders of all of these business alliances, combinations, and initiatives are going to be “no little plans.” It would behoove clinicians, clinician leaders, healthcare IT leaders, and all c-suite leaders in provider organizations to think Burnham-sized thoughts; these businesspeople from outside traditional healthcare delivery are certainly doing so.






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Blue Cross NC, Five Health Systems Announce Major Shift to Value-Based Care

January 16, 2019
by Heather Landi, Associate Editor
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The insurer aims to have half of its 3.89M customers covered by VBC contracts by next year; all customers in VBC arrangements in five years
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Blue Cross and Blue Shield of North Carolina (Blue Cross NC), one of the state’s largest insurers, and five of the state’s major health systems in North Carolina have announced a new value-based care program that encompasses hundreds of thousands of healthcare customers throughout the state.

The five health systems—Cone Health, Duke University Health System, UNC Health Care, Wake Forest Baptist Health and WakeMed Health & Hospitals—and their accountable care organizations (ACOs) have committed to participating in Blue Premier, a new value-based model of care in which Blue Cross NC and the health systems will be jointly responsible for better health outcomes, exceptional patient experience and lower costs, according to a Blue Cross NC press release.

“With agreements from five of the state’s major health systems and their ACOs, Blue Premier is one of the most rapid and comprehensive shifts to value-based payments in the nation,” Blue Cross NC officials stated. Patrick Conway, M.D., serves as president and CEO of the Durham-based health insurer and previously served as the Chief Medical Officer, Deputy Administrator, and Director of the Center for Medicare and Medicaid Innovation (CMMI), a division of the Centers for Medicare and Medicaid Services (CMS).

Within five years, Blue Cross NC has committed to having all 3.89 million customers covered under Blue Premier’s value-based care contracts. By early 2020, fifty percent or more of all Blue Cross NC members will have a provider who is jointly responsible for the quality and total cost of their care, the health insurer stated.

“As a practicing physician, I have experienced first-hand the challenges plaguing our health care system,” Conway said in a statement. “Historically, our health care system pays for services that may or may not improve a patient’s health, and our customers simply cannot afford this approach. Moving forward, insurers, doctors and hospitals must work together, and hold each other accountable for improving care and reducing costs. We applaud the leadership and commitment of these five leaders in health care to help transform health care delivery in North Carolina.”

During the HLTH Conference, held at the Aria Resort in Las Vegas last May, Conway discussed the payer-provided landscape in North Carolina and alluded to opportunities accelerate the move to value-based care and payment models, according to reporting from Editor-in-Chief Mark Hagland. “We’re looking at a new model, where patient care organizations can partner more fully with Blue Cross North Carolina,” Conway said, per Hagland’s report. And Conway continued, “We’re saying, you can take this alternative pathway with us. And we’ll jointly be accountable for the total quality and cost of care. And we want you to go into two-sided risk. And we’re wondering, should we turn off all prior authorization? And documentation other than for risk coding and STARS measures, we won’t worry about how you document. And for people in the audience, those kinds of partnerships are very exciting, because you’ve now got a provider and payer that are no longer locked into rigid rules, but where you can innovate on quality and customer experience.”

According to the insurer, Blue Premier ties payments to doctors and hospitals over time to the value of services that improve patient health. This means that total payments to the health systems under Blue Premier will be based on the health systems’ ability to manage the total cost of care and their overall performance, measured by industry quality standards. Through a “shared risk” financial model, the health systems will share in cost savings if they meet industry-standard goals to improve the health of patients – and share in the losses if they fall short. “The unprecedented commitment from these five large health systems makes Blue Premier one of the most advanced and comprehensive value-based care programs in North Carolina and the nation,” Blue Cross NC officials stated.

“This unprecedented step by Blue Cross NC and many of the state’s leading health care organizations will make a big difference in advancing high-quality, innovative care in North Carolina,” Mark McClellan, M.D., Ph.D., director of the Duke-Margolis Center for Health Policy said in a statement in the press release. “At Duke-Margolis, we remain committed to supporting state government and private-sector initiatives to reform payment and improve care – providing needed examples for the nation.” 

In a statement, Donald Gintzig, president and CEO, WakeMed Health & Hospitals, said, “This collaboration represents an important step forward in our efforts to provide patients in our area and across the state with high quality, coordinated services for the best value. Our health systems are bringing together valuable resources in a more integrated way that will ultimately lead to better health and more affordable health care.”

The news of the value-based care collaboration comes a month after the health insurer announced a partnership with Aledade, a Bethesda, Md.-based company focused on physician-led ACO development, to launch a value-based care initiative to support primary care physicians across the state. Through the initiative, the two companies will support physician-led ACOs tailored specifically for primary care physicians and the communities they serve. Through these ACO arrangements, Blue Cross NC will collaborate with Aledade to provide physicians with technology and data analytics tools to better manage patient care and costs. After joining these ACOs, practices gain a more comprehensive view of their patients’ total cost of care, gaps in quality of care, and experiences throughout the entire health care system, the companies said.


Related Insights For: Value-Based Care


Kaiser Health News Report: Clinics Treating Immigrants Find Themselves in Limbo Around Notification

January 15, 2019
by Mark Hagland, Editor-in-Chief
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The clinicians and leaders of U.S. patient care organizations continue to find themselves in a policy limbo around the information they share with federal and state authorities around their care for undocumented immigrants

The clinicians and leaders of U.S. patient care organizations continue to find themselves in a kind of policy limbo around the data and information they share with federal and state authorities around their medical care for undocumented immigrants, a new report in Kaiser Health News finds.

As Ana B. Ibarra wrote in a new report in Tuesday’s Kaiser Health News, “While the Trump administration decides whether to adopt a controversial policy that could jeopardize the legal status of immigrants who use public programs such as Medicaid, doctors and clinics are torn between informing patients about the potential risks and unnecessarily scaring them into dropping their coverage or avoiding care.” In her story, Ibarra quoted Tara McCollum Plese, chief external affairs officer at the Arizona Alliance for Community Health Centers, which represents 176 clinics, as saying, “We are walking a fine line. Until there is confirmation this indeed is going to be the policy, we don’t want to add to the angst and the concern.” However, if immigrants do come to a clinic wondering whether using Medicaid can affect their legal status, trained staff members will answer their questions, Plese told Ibarra.

Patient care organization leaders are working to figure out how to handle the situation, with some providers deciding to prepare their patients for the potential enactment of the proposal. At Asian Health Services, a clinic group that serves Alameda County, Calif., staff members pass out fact sheets about the proposed changes, provide updates via their patient newsletter and host workshops where patients can speak to legal experts in several Asian languages. “We can’t just sit back and watch,” CEO Sherry Hirota told Ibarra. “We allocate resources to this because that’s part of our job as a community health center — to be there not only when they’re covered, but to be there always,” even when that coverage is in jeopardy, she said.

The proposed “public charge” rule, which is awaiting final action by the U.S. Department of Homeland Security, would allow the federal government to consider immigrants’ use of an expanded list of public benefit programs including Medicaid, CalFresh and Section 8 housing as a reason to deny lawful permanent residency — also known as green card status. Medicaid is the state-federal health insurance program for low-income people. Currently, people are considered public charges if they rely on cash assistance (Temporary Assistance for Needy Families or Supplemental Security Income) or need federal help paying for long-term care.



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