Blue Shield of California was awarded the contract, which provides coverage to more than 400,000 current and retired California state employees, over Anthem Blue Cross. As part of the agreement, Blue Shield will be responsible for hitting medical cost trend and quality improvement targets.
In the first year, Blue Shield and Included Health, which will provide population health management, must keep costs under 5.5%. The target shrinks to 3% by 2029. Blue Shield and Included Health will stake $464 million in hitting these targets.
Sandra Clarke, COO of Blue Shield of California, sat down with Becker’s to discuss how Blue Shield of California plans to meet these goals.
Note: This conversation has been lightly edited for length and clarity.
Question: Part of this contract is a partnership with Included Health for population health management. How will this partnership work in practice?
Sandra Clarke: What’s different about this care model that we’re going to be using is a real focus on data. We have this new integrated data hub which is going to give us insights that are necessary to create a more personalized experience, and really improve members’ access to high-quality, targeted care. That gives us the opportunity to work with Included to really help members navigate their healthcare and get the services that they need.
Included has been cited a few times for some of the member engagement tools that they’ve built. We feel that could be a real nice compliment to the data and the insights that we have developed. So we’re very excited about this opportunity to take some of the experience we have working with other population health vendors and use that process that we’ve already established to have a seamless experience for the CalPERS members that is digital, personal and very much focused on improving their care.
Q: You have yearly cost targets to meet as part of this contract. How will you ensure you keep cost growth down?
SC: I think the data, the insights that will help create that more personalized experience, is very important as a foundational item, because you can then start to take unnecessary cost out by making sure the patient and the provider are getting the right information for the appropriate treatment the first time, as opposed to having to go through and try and fail on different potential solutions.
The other thing is that we are moving our provider contracts over to our new pay-for-value model at a pretty good clip. We have about 35% of our providers in a pay-for-value contract, and we’re actively scaling. We’ll be well north of 50% by next year. We believe that those things continue to move the alignment of financial incentives with the providers, members and Blue Shield together to work on the cost of care, and getting it to be appropriate and lower.
California has an Office of Health Care Affordability right now that has set targets in that space in terms of how much cost trends will grow in healthcare in the state. We think the initiatives we are doing, pay for value being just one of them, are going to be very key to that. Other ones that we’ve talked about in the past are the work to create a more digital and automated connection with the provider offices to reduce administrative costs, revenue cycle management expenses, the time back and forth with paperwork relative to claims, particularly for high cost claims. We think all of those initiatives, which are all underway, combined with more actional real-time data will be key to driving these lower cost trends.
Q: Together with Included Health, $464 million is at risk over five years in this contract. How did you decide this contract had the right amount of risk?
SC: As a health plan that has a large number of fully insured members, we take on cost of healthcare risk every day, across multiple lines, for members in the state and outside of California. This is not all that unique from that perspective. The structure of doing it in this particular contract so publicly is a little bit different. But if you think about the fact that we’re taking performance risk every time we price a fully insured business, we have a lot of experience in doing this, which gives us confidence as well. Combine that with the additional digital tools, the pay-for-value to align incentives with the providers, and it all fits.
Q: You also have quality targets to meet as a part of this contract. What strategies do you have in place to meet those?
SC: We have healthcare quality targets for every line of business. Right now, we are performing to Medicare stars, to the California Medi-Cal program quality targets, which are extensive, and we’re doing quite well on those. Covered California has quality measures, and we perform to those, and we are also accredited by NCQA and have to meet quality targets to maintain that accreditation.
I’m not sure there’s a quality target that we’re not already addressing in some way, shape or form. You have to combine it with the right infrastructure, which we believe we do. Based on that, and where we stand with our other quality programs today, we believe this is already in place.
Q: What are the biggest challenges standing in the way of hitting these goals?
SC: The overall healthcare cost environment right now is very inflationary. There are a lot of expenses relative to drugs, which CalPERS has covered through a separate contract.
We have to continue to move the overall system away from fee for service. The fee-for-service model and the tendency that it leads to an overuse of healthcare is very real. I think making sure that’s being appropriately managed as we move these providers into this alternative payment model structure — that’s the biggest challenge that I think all health plans, and as a society, we face.