Insurer all in on curbing costs

Health care costs in the more than 30 years since Peter Andruszkiewicz, CEO of Blue Cross & Blue Shield of Rhode Island, entered the business have increased – on average – at about two to three times the rate of inflation. But Andruszkiewicz, inspired by comprehensive-care systems he’s seen work around the country, has set a goal to reduce that rate for his customers to levels consistent with inflation by 2018.
In November, Andruszkiewicz was named chairman of the board of directors of the Greater Providence Chamber of Commerce. He told his board that the region needs a collective strategy moving forward in business, and says the same is true for health care.

PBN: You spent three years running a health plan in Georgia and you’ve now been [in Rhode Island] for about three years, how do the two markets differ and what similarities can be drawn?
ANDRUSZKIEWICZ: The differences are easier. I worked in Atlanta for a company called Kaiser [Foundation Health Plan], which is an integrated system. Kaiser is both a health plan and a delivery system, so the alignment between the people who provide the care and the people who pay for the care is very tight and complete. That’s why systems like Kaiser and a whole bunch of these plans around the country are all held out as a model of what health care reform should be.
I grew up in Boston, and have lived in a bunch of places, and they’ve all been like Rhode Island. The Rhode Island systems are not connected. Health care providers are not connected, they practice in silos, and they don’t coordinate their service around the patients.
In the Kaiser system, at a clinic, all these different types of care are in a single place. It’s very cool actually. … They are aligned with sets of primary care [providers] and specialty physicians. … It’s all about them working as a team around the patient. It’s not science fiction; it’s happening all around the country, but where Kaiser is at one end of the spectrum, Rhode Island is at the other.

PBN: The Affordable Care Act, popularly referred to as Obamacare, is supposed to go a long way to expand access, but what about containing costs?
ANDRUSZKIEWICZ: The ACA is trying to address the things that need to be done – that need to be fixed – and the first is to get everyone covered. That’s the purpose of the [state health-benefit] exchanges. The exchanges don’t have any effect on cost. Zero. The exchanges are built as vehicles to getting people covered, which is a really important thing.
The law of large numbers says that if you have all the people in a pool, and if the pool is the state of Rhode Island with about 1 million people, and they all have health insurance, it will be set at a price that everyone could afford. And the thing is – we’re doing pretty [well]. The conventional wisdom is that 120,000 Rhode Islanders were uninsured before the advent of the exchange and now the conventional wisdom is that we have about half of those people covered.
The second structural problem the ACA tries to fix is how we pay for care.
You’re dealing with institutional behavior that is so deep and embedded over years and years. I always say, ‘Put the health insurance companies at the head of the line of the constituencies of [this] dysfunctional system that we have, but there are a lot of people in line behind us.’ … The system we have today is fragmented. It incents more hospital days, more surgeries, more pharmacy and primary care visits; it incents more fragmentation and it drives higher cost.

PBN: Why should health care providers move away from a system that’s highly profitable?
ANDRUSZKIEWICZ: There is a lot of inertia in the provider community, and there is inertia for a lot of reasons. Some providers are saying ‘Hell no, I’m not going to change. I like what’s happening now, why would I change?’ People are afraid to change. … That’s human nature, we should expect that. Then, there is some inertia in providers who are ready to change. They want to change, they want to be a part of the future, but they don’t know how. Then there are pioneers who are out ahead like Coastal Medical, Care New England. … They’re being incrementally rewarded and others are seeing that and they’re going to come behind.
I have high hopes that once new systems of care start to emerge and start to take hold and produce results, providers will follow. It’s classic change management: 10 percent are out ahead, 10 percent will not change and 80 percent are in the middle waiting it out.

PBN: How do you make that leap away from today’s system and how will that cut costs?
ANDRUSZKIEWICZ: The new business model is to be partners with providers, and we are trying to be a partner with providers who are ready to change the way they do business.
If [they] do this [they’ll] get rewarded. The more [they] do this, the more reward [they’ll] get. It’s basic economics and basic human behavior.
We have what we call a bundle payment methodology. … We say, instead of paying for each widget (individual unit of health care cost), we pay for the whole episode. So, from the time pain hits in their knee until they go into the hospital and have the procedure and have the physician – all the way until they’ve finished the whole episode, we’re managing the cost of that total episode [for that patient].
Now, using the bundle payments, the specialist – who would be in the business to see the patient as many times as they could – [has] no more incentive.
The hospitals today, and I say it all the time, [are] like running a hotel: If the beds are filled, you’re doing well. If they aren’t, then you’re not doing well.
It has to change. We can’t go backwards. It’s now a question of who – and [then] how fast can we get it done.

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PBN: How soon do you see this system of health care changing?
ANDRUSZKIEWICZ: I don’t know for sure. But I really do believe that you can’t ever see where the tipping point will be as you’re heading toward it, but once you hit it, the momentum starts to build very quickly, and I believe that’s what’s going to happen here. Our goal is to reduce medical inflation for our customers by 2018 to levels of inflation. We’re betting on the future and looking for courageous providers who’re ready to move into the future. We think there’s going to be an advantage to move into the future forever. There will be benefits. I think there will be winners and losers, but we’re going to put our money with those who’re ready to go forward, because we can’t go backwards.

PBN: How has your experience been working with the state’s health-benefit exchange, HealthSource RI?
ANDRUSZKIEWICZ: The ACA is the law of the land, and we’re trying to be collaborative with the state. We used a lot of our resources to help stand the thing up. So, having said that, we haven’t agreed with the state on some things from the beginning and that’s to the extent to which the exchange was built. We’ve said since the very beginning – and well before they started to design and started to build – ‘you should only build what is required by the law.’ But they built what is required and another layer, and another layer, and another layer. They built way more and in a lot of different ways than what’s needed and required. Now they have to strip down to what the law requires – and they should – and that’s what we’ve suggested to [Gov. Gina M. Raimondo] and her team.

PBN: Would you like to see the exchange funded locally, or sent back to the feds? What impact, either way, would that have on Blue Cross?
ANDRUSZKIEWICZ: Having autonomy allows us to connect it to the Medicaid system, which is what they’ve done. There are benefits to that and from a practical standpoint we spent a ballpark cost of [about] $6 million – we’ve estimated – to help the state build what they have today. If we went to the federal exchange we’d be flushing that money away and have to spend whatever more to get set up with the feds and that’s not our money, it’s our customers’ money. •

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