Throw out the fax machine: Blue Shield of California's CEO on conquering healthcare's inertia

Paul Markovich has spent more than two decades at Blue Shield of California, the past 10 as its president and CEO. 

He ranks among the longest-serving Blue Cross Blue Shield CEOs — but despite decades of industry experience, he said it's much more striking what hasn't changed in healthcare than what has. 

When he began his career as a healthcare management consultant in the early 1990s, communication was often sent via fax machine — the same is still true in healthcare 30 years later, he noted — one symptom of resistance to change.

"I would say I haven't witnessed enough change in the industry. To be honest, I think that there's too much inertia, complacency and outright resistance to change," Mr. Markovich told Becker's. 

Mr. Markovich is trying to disrupt some of this inertia. Last month, Blue Shield of California made headlines when it said it would not renew its contract for pharmacy benefits with CVS Caremark, instead opting for a combination of five organizations, including Amazon Pharmacy and Mark Cuban's Cost Plus Drug Co., to manage its drug benefits. 

This same resistance to change is holding back other innovations, like value-based care, Mr. Markovich said. Providers, and some health plans, have "fear in their voices" about moving away from fee-for-service, he added. 

"That, to me, is the biggest reason it hasn't happened. But it needs to happen. I believe that it will happen, because there are organizations like ours that aggressively embrace it, and start to differentially recognize the improvements in affordability and quality and patient experience that are going to force the market to move."

The future of BCBS 

Oakland-based Blue Shield of California has 4.8 million members across commercial, individual and government markets. 

Facing insurance giants like UnitedHealth Group and CVS Health, some Blues plans are moving to consolidate. 

Blues plans, or any small health plans, will have to answer questions of scale, Mr. Markovich said. One way to address this is through mergers and acquisitions, like Elevance Health's planned acquisition of BCBS Louisiana, but it's not the only way to compete with larger plans. 

"You're seeing more shared infrastructure among and between plans, and models where they are outsourcing or contracting to other Blue plans," Mr. Markovich said. "You're going to see multiple ways of plans trying to address this, but I think we will see material movement, over the next five years, of partnerships and joint ventures, and potentially mergers and acquisitions, as an attempt to try to address this scale issue." 

Health plans' pay is increasingly tied to quality outcomes, he added. In Medicare Advantage, plans need four stars to receive maximum payments from CMS. In Covered California, the state's ACA exchange, plans face financial penalties if they don't hit quality benchmarks. 

This means plans need to have more influence over care than they have in the past to thrive, which can be a challenge for smaller plans, but they don't necessarily have to own providers outright. 

"Health plans are going to need to have those capabilities to get much more integrated digitally, operationally, financially with the delivery system. That's not inexpensive to do. Even if you're not trying to acquire physician practices, or physician groups, the technology and the capabilities required to make that integration work at scale is not inexpensive," Mr. Markovich said. 

He noted that even though the landscape is changing, the strength of nonprofit BCBS plans is that they are mission-oriented and deeply tied to the local communities they serve. 

"I think it's unique in the world, frankly, and I believe in our collective ability to truly make a difference, a real impact on the big problems and challenges of the day in healthcare."

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