AHIP Coverage (May/June 2007)
Thinking Locally and Out of the Box
Blue Cross of Northeastern Pennsylvania is embarking on a plan to improve access and affordability by investing in the regional health care delivery system.
By Gerard Snyder
Few people understand the strengths and weaknesses of the delivery system in the 13 counties where Blue Cross of Northeastern Pennsylvania (BCNEPA), Wilkes-Barre, serves its 600,000 members better than Denise Cesare. But when our president and CEO looked into the future, she saw a diminishing ability to offer medical services that should be available locally. The challenges facing the region included insufficient Medicare and Medicaid reimbursement, aging facilities, and an inability to recruit and retain physicians.
While the delivery system has struggled with structural challenges, there has been an exodus of medical care to metropolitan centers such as Philadelphia and New York, and Harrisburg, the state capital. That outmigration of more than $750 million translated to additional premiums for BCNEPA’s customers due to the extra costs of obtaining care at outlier facilities. In many cases, members who were acquiring medical care outside the service area incurred costs that were 20 percent higher than services of comparable quality available locally.
Cesare recognized that inaction would strangle the local delivery system and ultimately stifle access to health care coverage. She knew the key to continued access and affordability was a strong, integrated health care delivery system.
She also knew BCNEPA needed to change the market’s dynamics. Since 2001, BCNEPA has devoted millions of dollars toward keeping the cost of health care coverage within customers’ reach, many of whom are small businesses with less than 100 employees. Although investing dollars this way temporarily dampened premiums, it did little to stem rapidly increasing medical care costs and the migration of care.
“The root causes were accelerating rather than decelerating,” Cesare says. “Although our wellness and care management programs were showing potential, their full ability to influence medical care costs would take years. We needed to act aggressively and decisively if we were going to make a positive impact on access and affordability.
“One of the most important responsibilities of our plan is to ensure that it has quality caregivers for our members. Although regional hospitals are delivering quality care now, there’s a real fear that major financial challenges will prevent them from doing so in the future.”
Cesare, the executive staff, and BCNEPA’s board of directors began searching for a solution. They studied the issue for more than two years, consulting with hospital CEOs and seeking input from business leaders. Rather than continuing its previous tactics, BCNEPA envisioned a more strategic application of dollars that would curb long-term cost trends instead of merely providing one-time relief from escalating costs, which does nothing to help solve the fundamental problems of the delivery system.
Their conclusion: The best way for BCNEPA to influence rising medical care costs is to focus on improving health care delivery systems.
Revitalizing Regional Care
Last December, BCNEPA announced that as part of its “Building a Healthy Future Together” initiative, it would invest in the health care delivery systems responsible for providing medical services to more than two thirds of its members and would also invest in a proposed medical college. Additional funds will be made available to help smaller, local hospitals delivering care in mostly rural settings.
The initiative strengthens and provides depth to the region’s medical safety net. By enabling the health care delivery systems to advance their services, technology, and recruiting, BCNEPA is addressing the critical issues that impair access to and affordability of health care coverage, particularly in rural areas.
Cesare and Brian J. Rinker, BCNEPA’s senior vice president for health plan operations, understood the need for each health care delivery system to identify its priorities. Participating organizations were invited to explain how their improvement plans would affect their patient base. Rinker organized a retreat for BCNEPA’s board of directors where hospital administrators delivered detailed analyses of their organizations’ visions. In addition to aligning the board with the insurer’s key providers, the retreat gave administrators an opportunity to discuss how they could meet common needs, create the underpinnings for a shared IT infrastructure, and collaborate to improve the availability of medical services over time.
BCNEPA’s strategy hinges on measurable goals. Cesare expects the investments in locally controlled, community-based health care delivery systems to annually restore more than $150 million of the $750 million of care currently migrating outside the region. Shifting dollars back to local health care providers will measurably change the landscape in the territory bordering New York in the north, New Jersey in the east, Allentown, Pennsylvania, in the south, and State College, Pennsylvania, in the west.
One anticipated dramatic outcome will occur in Scranton, where BCNEPA’s assistance will support an alliance between Moses Taylor Hospital Health Care System and Community Medical Center (CMC) Healthcare System. The alliance preserves choice and expands opportunities to develop new health care initiatives in a city that’s been affected by declining Medicare reimbursement and historic rivalries.
Moses Taylor and CMC symbolize the difficulties of delivering medical care in the state’s northeastern and north central regions. Situated a few blocks from each other and around the corner from another major hospital system, the hospitals depend on Medicare and Medicaid for more than 50 percent of their revenue. Shortfalls from government payers are forcing the hospitals to dip deeply into their cash reserves and shift costs to commercial insurers, leaving little for investments in technology and infrastructure. A previous attempt to align the two institutions failed due to financial concerns.
Funds committed to the alliance resolve most of the issues faced by the hospitals. The investment also helps provide local service to health plan members and avoids the expensive migration to nearby cities. After retiring debt, administrators will devote remaining funds to IT, medical technology, and physician recruitment and retention.
The investment in recruitment and retention dovetails with the funds BCNEPA has committed to support the proposed regional Northeast Pennsylvania College of Medicine, which will be located in Scranton. Studies commissioned by a consortium of health care leaders indicate that 34 percent of current physicians in the area are over age 50. Additionally, CMC’s Trauma Center depends almost exclusively on one neurosurgeon for coverage. Bench strength for gastroenterologists, neurologists, orthopedists, and subspecialties also runs thin.
Robert Wright, M.D., chairman of the Medical Education Development Consortium, says BCNEPA’s support for the medical college will help plug gaps in the provider network by attracting faculty who practice these specialties and by training new doctors who will perform residencies at regional hospitals. “Approximately 40 percent of medical students typically remain in the region where they perform their residencies,” Wright notes.
Although strengthening the provider network is BCNEPA’s primary aim for the medical college, its support will yield future economic benefits. By 2025, the college is expected to generate a $54 million economic impact and 900 local jobs.
A Community Effort
Similar economic and health benefits will ripple throughout other local economies as plans to expand services take root. William Host, M.D., president and CEO at Wyoming Valley Health Care System, acknowledges the importance of BCNEPA’s initiative in advancing medical care and helping businesses in neighboring Luzerne County. With one of the oldest populations in the country, Luzerne County has experienced rapid increases in medical care costs. Small business owners, senior citizens, and other vulnerable groups have been extremely sensitive to premium increases and are anxious for solutions that will lower their exposure to rising costs.
Although developing new services is one of Host’s long-term goals, he believes slowing the exodus of patients from regional medical centers will deliver economic benefits through lower costs and higher patient satisfaction. Host agrees with Cesare that outmigration of medical care can be reversed by expanding the physician base, investing in advanced services and technology, and combating an erroneous perception that medical care is better “elsewhere.”
He cites one example in which a patient visited a prominent out-of-area cancer center for treatment of an unusual form of the disease. Dissatisfied with her result, the patient acquired a second opinion, also from an out-of-area physician. Ironically, during her exam, she learned that the expertise and equipment necessary to treat her condition were located in only a few medical centers in the country. One of them was the local Wilkes-Barre General Hospital.
Host’s organization will use funding from BCNEPA in a major expansion project leading to a critical care pavilion, a center of excellence for cancer care, stronger information technology capabilities, and a center for patient safety.
“There is no question that quality hospitals are essential for delivering quality health care to our region,” Host says. “Strengthening locally controlled, community-based hospitals is a critical first step in building a new platform for the future of our region’s health care system. It’s the right thing to do at the right time for the right reasons.”
Susquehanna Health, an alliance of three area hospitals in the insurer’s western region, has aggressive plans of its own. Once home to the largest concentration of millionaires in the state, the Williamsport area where Susquehanna Health dominates is transitioning from a hub for lumber and aircraft barons to a center for essential medical services.
Susquehanna Health is beginning the lengthy process of modernizing The Williamsport Hospital & Medical Center to meet expanding patient needs. Its two other regional campuses also will be refreshed with medical and information technology upgrades.
Steven P. Johnson, Susquehanna Health president and CEO, regards the evolving relationship between BCNEPA and regional providers as long overdue. He points out that BCNEPA’s investment encourages collaboration among regional providers as a means to reduce costs to consumers and employers who shoulder the financial burden of medical coverage.
Johnson expects his hospital to keep current with modern medical practices, procedures, and quality initiatives. He cites shared information technology networks as an opportunity for all organizations involved in BCNEPA’s investments to return value to those they serve. “Each organization shares a common goal of delivering the highest quality of care to our patients and members,” he says. “We should be doing all we can to do our jobs as efficiently, effectively, and economically as possible. Five years ago you would never see the leaders of our organizations sitting down and addressing common concerns and problems. Now, it is becoming routine.”
Investing In the Future
BCNEPA’s Rinker believes that the terms and conditions negotiated with the delivery systems will ensure that investment dollars are spent according to the spirit established by the initiative. The insurer and the delivery systems agreed to incorporate contract language protecting investments from being absorbed by suitors seeking takeover opportunities. Other conditions allow BCNEPA to nominate representatives to system boards of directors but remain removed from daily operations. The hospitals will continue to accept insurance plans competing with BCNEPA. Delegates to the boards will be excluded from any contract negotiations with other carriers.
“We have no interest in running hospitals, but we do have an interest in ensuring that the investments create the greatest value for those we serve,” notes Rinker. “The goal is to serve people better.”
Harold E. Anderson, president and CEO of the Moses Taylor Hospital and CMC alliance, acknowledges that BCNEPA will have input as part of the new health system’s board, but he thinks the arrangements will increase collaboration between facilities and the insurer. “We should be working together on these issues rather than battling with one another,” he says.
While working with providers to identify and solve their challenges, BCNEPA sought counsel from the Pennsylvania Insurance Department and the Pennsylvania Attorney General’s Office. Shortly before the announcement, the insurer briefed federal and local lawmakers, business and community leaders, medical society presidents, and other key communicators. Outreach continues with customers and with business and community groups to provide them with timely information.
Cesare, meanwhile, continues working on the drivers that are pumping energy into medical care costs. She recognizes that the complexity of health care prevents easy fixes, especially in primarily rural areas such as those served by BCNEPA. By maintaining a regional focus, she anticipates a collaborative health care delivery system that can offer broader specialty services, improve facilities and technology, and recruit and retain physicians.
“Our investment in better physical health is an investment in our region’s financial health. It will raise the bar on quality and service, while at the same time promoting the reinvestment of local dollars,” she says.
Cesare concedes that the connection between helping health care delivery systems and affordability is a difficult case to make. Companies contemplating similar initiatives should heighten awareness among constituents by conducting outreach before and after any public announcement. “The concept of rebates reducing premiums is deeply ingrained in consumers’ minds,” she points out. “We have to help consumers shift their mindset from short-term Band-Aids to long-term solutions.
“Improvements and efficiencies planned by the hospitals we are assisting will help to slow the rise in our local health care costs,” she continues. “Without this support and a competitive health care marketplace, this region will suffer higher costs, and ultimately, higher premiums, placing further pressure on health care access for area residents. We’re just at the beginning of our journey, but we’re proud to be taking this first step.”
Gerard Snyder is spokesman at Blue Cross of Northeastern Pennsylvania, Wilkes-Barre.
