Security Health Plan CEO Julie Brussow (left) and Marshfield Clinic CFO Gordon Edwards are proving how connecting a system with a provider-run plan can work best.
The Marshfield Clinic Health System in Wisconsin has two hospitals and over 60 clinics located in the northern, central and western areas of the state. But unlike other rural systems that are struggling to stay afloat due to lower reimbursements, mounting bad debt and payer mixes that rely too heavily on the government, Marshfield is thriving.
That's because Marshfield also runs its own health plan.
"The clinic has a long history of looking at, how do you take care of the whole patient?" said system CFO Gordon Edwards. "It was an extension of the work being done. The importance of insurance fit the DNA of the clinic."
It's that link between the plan and its provider network that is paying off both financially and in the quality of care, according to Edwards and Security Health Plan CEO Julie Brussow.
The executives said the system gets an even split of revenue from premiums and ambulatory care, said Edwards, whose role as CFO of both the provider and payer sides reinforces how the finances of both are interconnected.
"In the health plan business, taking premium risk is not that you only have upside gains, you have years where things can go pretty negative," Edwards said. "It does create some stabilization of revenue for the system. When it's good on the provider side, (it may) not be good on the health plan side and vice-versa. It allows us the creativity to think about how we manage the delivery of care on the value we see."
Running its own health plan has allowed Marshfield Clinic to design a value-based reimbursement model that rewards physicians for quality, clean coding and cost maintenance.
Security Health Plan runs a "value pool" account that reimburses its own facilities and physicians based on performance.
Through these efforts, Marshfield's accountable care organization has been able to lower costs by 14 percent.
Brussow has been with the health system for 30 years and was there when Marshfield took full ownership of the health plan in 1986 and changed its name to Security Health Plan.
"We had to build the operations, we built an insurance company from the ground-up," Brussow said, which meant bringing the claims operations in-house and doing their own pricing and underwriting.
"We can identify where there are opportunities for efficiencies. We can executive alternative payment constructs, pay for performance models," Brussow said. "We recognized the value early on in the claims data."
Marshfield gets information on the utilization of care, what the costs are for each episode, and the price points across the delivery system.
For example, when a patient leaves the exam room with a prescription, they know on the payer side whether the script is filled and if the patient is getting care outside of the clinics, because they're paying the claims.
"We can measure what our members on the health plan have saved in out-of-pocket costs," Brussow said. "That's where we will be able to make a difference in the communities we're serving."
What's most important, according to Edwards and Brussow, is how having control over both the clinical side and claims results in better patient care.
"We're spending a premium dollar on the delivery of care," Edwards said.
This is shown in Marshfield's stable, but not stellar, margin goals.
"Our objective is to sustain a margin in the 1 to 2 percent range," Edwards said.
Learning from Marshfield
Starting an insurance business is tough for providers, who already know that the cost is high and the return on investment slow.
One of the main barriers to success is providers thinking they know how to run the payer side of operations. In fact, sometimes providers jump in without knowing who they're selling to, according to Edwards.
"Providers underestimate the value that payers bring," said Zachary Hafner, a partner with the Advisory Board. "They think they collect checks, cash them and hang out in the smoking lounge. In reality, there's a lot of administrative burden, sales, marketing, enrollments, claims."
Payers build businesses at a very large scale to eke out a healthy margin, Hafner said, but fall short when it comes to patient engagement.
"Payers are not as good at care management," he said. "A payer calling up a patient giving advice feels a lot like the IRS calling and saying it would like to help you with your taxes."
But just because a healthcare provider excels at dealing directly with patients, systems should make sure they've done their homework before jumping into the insurance market.
"What you really need to do is step back and look at the market from an insurance lens," Edwards said. "Who's the buyer and how do I access those markets from a plan perspective?"
A provider should look at the population first, analyzing the scope of the exchange market, small group, large group, Medicare Advantage and state Medicaid patients.
A growing field
There are 272 provided-sponsored health plans and their number is growing, according to the 2016 Directory of Health Plans by Atlantic Information Services, an independent service information provider specializing in healthcare information.
AIS is still working with raw data for the 2017 plan year, but based on its market overview for this year, provider-sponsored plans represent 52 percent of health insurance entities and 11 percent of health plan enrollment nationally.
Also, of the 53 public insurance exchanges, 34 had at least one provider-sponsored insurance entity offering plans for the 2016 plan year.
The lowest-risk populations tend to be employer-based, and provider-sponsored health plans have a high percentage of large-group employer-based members, at 24 percent, compared to individual, at 10 percent, and small group members, at 15 percent.
Most of the top 25 plans are dominated by some of the biggest names in healthcare, systems that dwarf Marshfield in scale. California's Kaiser Permanente is listed four times in various regions, while other mega-systems such as Geisinger and UPMC also lead the pack.
At the top of the list of 25, by enrollment, is Kaiser of California, at over 7 million enrolled consumers. The next largest is close only by half. AmeriHealth Caritas Family of Companies has close to 3 million enrolled. Their business is in Medicaid.
But what you're not seeing in the top 25 provider-sponsored health plans are the PACE programs, said Susan Namovicz-Peat, director of Directories and Databases for AIS. These are the Programs of All-Inclusive Care for the Elderly, which provide comprehensive medical and social services to senior citizens who live in community settings. Most are dually eligible for Medicare and Medicaid benefits.
"There is a trend toward serving those dually eligible for Medicare and Medicaid," she said. "Every now and then a community-based clinic will create their own insurance entity through Medicaid or through a local community government."
These providers serve from 10 people upwards to 484, the largest she's seen.
"What they are is a provider who contracts with the Centers for Medicare and Medicaid Services or their state," she said. "They don't need much of a network, they are doing it all."
Owning the competition
For all of the benefits of a system running its own plan, the complexity often comes in when a provider competes with its own insurance product. The payer-provider relationship in healthcare is often thought to be one more thing that's more combatant than collaborative.
"Our insurance product competes with the provider system on a day-to-day basis," Edwards said. "That's what local purchasers are demanding."
The health delivery system has contractual relationships with other insurance plans. In fact, the vast majority of contracts are with other plans, according to Edwards.
Security also partners with other provider systems that don't have a health plan.
"Not everybody goes through Security," Edwards said. "This goes back to the market."
For instance, a large employer may have employees not only in Wisconsin, but out of state, possibly as far away as Georgia.
"We have zero probability on covering those lives," Edwards said. "We're not a pathway for a large regional employer."
"Provider brands don't sell insurance," Hafner said. "When you're pursuing regional accounts, people can access the Blue Cross national network."
"Brand identification is very important," Brussow said.
If they were starting out today, Edwards and Brussow said Marshfield might have considered other options other than owning the plan since the challenges of today weren't relevant in 1986.
When Security started out, it offered two plan designs. There were rates for a single person and a family. Even five years ago, things weren't as complicated, they said.
The Affordable Care Act, and newer compliance requirements from the Centers for Medicare and Medicaid Services and other federal and state regulations changed that.
But since their health plan was in place before the major reform, it is giving Marshfield an advantage now, Edwards said.
"It informs our strategies on what we need to build and where we need to partner," he said. "It also helps us take a look at clinical decision-making on the total cost of care. When we make a conscious decision on the price point on the delivery side, whether it's the Affordable Care Act population, small group or other insurance product, I know whatever discount we provide translates into premium savings."
This information doesn't translate in systems without a plan, he said.
Marshfield Clinic started out as a large group practice a century ago. But in 1971, the Greater Marshfield Community Health Plan, owned by three entities including Marshfield, became Wisconsin's first health maintenance organization.
"The concept of HMOs was fairly new," Brussow said. "They were looking for way to help patients with the expenses."
The health plan became Security Health Plan when Marshfield took full ownership in 1986.
The nonprofit plan now has more than 220,000 members and offers a full spectrum of products including Medicare Advantage, exchange market plans, individual and small business options, group commercial and third party administrative services. It partners with the state on Wisconsin Medicaid BadgerCare Plus.
Last year a Marshfield initiative moved some surgical procedures out of acute care to ambulatory centers. They opened three comfort and recovery suites in Marshfield, Eau Claire and Wausau, Wisconsin.
They also have bundled payment arrangements and are in the midst of using telemedicine to treat patients at home.
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Starting the comfort and recovery suites only required five months from when the board approved strategy to being open for business, Brussow said.
"The innovation aspect is real," Brussow said. "We are measuring savings from a payer perspective on claims I would have paid on inpatient hospital claims."
In the future, Marshfield is looking to either acquire or build new hospitals. It has already announced that it will purchase St. Joseph's Hospital in Marshfield from Ascension, and Edwards has said it has plans to build another hospital as well.
"Moving forward to get into the acute care business in many of our key markets, our health plan data demonstrating the cost, we think we can buy and operate the service at a better price point," Edwards said.
Edwards said the plan also gives Marshfield the flexibility to be creative with changes to its care delivery, since it is less beholden to third-party payers.
"I wouldn't be able to do that on the delivery side if I didn't have the plan, with the membership and premiums to do those things," he said. "Heads in beds is not a sustainable model. The job is to help people see how cohesiveness across the system creates value. I see the interconnectedness of this."