Since 2004, Dr. Michael Cropp has served as president and CEO of Independent Health, a not-for-profit health insurer based in Buffalo, N.Y., with 2014 revenue of about $1.8 billion. The plan serves nearly 400,000 members in western New York state, including about 92,000 Medicare Advantage members. It also owns a pharmacy benefit management company, Pharmacy Benefit Dimensions, and a specialty pharmacy distribution company called Reliance Rx. Cropp serves on the boards of America's Health Insurance Plans and the Alliance of Community Health Plans, and is founding chairman of GO Bike Buffalo, which works to create sustainable transportation options. Modern Healthcare reporter Bob Herman recently spoke with Cropp about surprise medical bills, how his plan reduced premiums this year and his views of prescription drug prices. This is an edited transcript.
'There is tremendous profit-taking going on in healthcare'
Modern Healthcare: New York state has regulated surprise medical bills involving out-of-network charges. How can insurers, hospitals and physicians resolve these types of billing issues?
Dr. Michael Cropp: We see less of this in our region. Part of that is because about 95% of local physicians are participating with us. We work closely with our hospitals and physicians, so there are few opportunities for people to end up being cared for by somebody who is not a participating provider. When one of our members ends up in a situation where they were treated by a non-participating provider they had no ability to impact, we go to bat for the member. We hold them harmless and will, in some cases, go directly to the provider and get them to accept our rates.
We're seeing more of the surprise bill situation take place when there is a group of providers that may be part of a national organization that doesn't quite understand the local dynamic.
MH: Has Independent Health created narrow provider network plans?
Cropp: We have both a commercial and a Medicare Advantage product with a select network. We have identified higher-performing primary-care practices to be the base of the network. We've worked collaboratively with these practices to enhance access to care for our members, to demonstrate that they're providing more consistent quality in terms of prevention, and in treatment of common conditions, and they're also more efficient in their use of resources. That efficiency translates into lower premiums.
When individual Medicare beneficiaries see the opportunity to get greater value in terms of less expense out of their pocket, boy, they'll make that call.
MH: What do you mean by high-performing?
Cropp: It starts with making sure these practices are available to their patients when the patients need them. This includes more advanced scheduling systems and being able to provide e-mail and phone consultations, so that people can get simple things taken care of easily without an office visit. It also includes the standard quality metrics on cancer screening, disease prevention and evidence-based practices for treating chronic conditions.
MH: How are Medicare Advantage and the Affordable Care Act open enrollments shaping up for 2016?
Cropp: With Medicare, we have had really good growth over the past few years. We now represent 55% of the managed Medicare market in our markets, and we expect we will be competitive again this year because our premiums have generally been the most affordable and the benefits quite desirable. We have a zero-dollar premium plan, probably the only local one that's out there right now.
Our reputation for service and caring has served us well in terms of the growth in the Medicare market. On the commercial side, large group is basically experience-rated and we have tended to do well in terms of our experience there. We're expecting another solid year. In small group, our rates have actually gone down. So we're expected to be very competitive in the small-group market for this open-enrollment period.
On the individual exchange, our rates went down considerably, so we expect to be quite competitive. There are probably about 10,000 members of the Health Republic co-op plan, which is shutting down. We anticipate we'll get a pretty hefty share of that group.
MH: How were you able to reduce your premiums, and what happened with Health Republic?
Cropp: We worked closely with our physicians on performance and quality. We've always felt that if you focus on quality, costs will follow. That clearly has played out for us.
On Health Republic, I think what happened was they rolled the dice and anticipated that they were going to get a much younger, healthier population than they actually got. That's why they ended up pricing their products 40% below the reasonable-low premiums in our market.
MH: Does that illustrate how difficult it is to start a health insurance plan?
Cropp: It's going to be interesting to watch as hospitals decide to get into the insurance business and see how they will do, because it's not an easy business. They call it the risk business for a reason.
MH: Do you view capitation as an effective alternative to fee-for-service?
Cropp: Capitation can help to establish that framework of accountability. But capitation runs the risk of underutilization. If you're not fully understanding how to monitor for the effects of underutilization, and where to invest to enhance utilization for the things you want to see more of, capitation can fail.
For our primary-care physicians, we've moved to a blended payment model, where we pay them fees for those services that have proven effective in helping to either prevent diseases or better manage chronic conditions. The rest of the money to primary-care physicians flows in a pre-payment tied to the illness burden of their practice. That allows them to provide the e-mail, telephonic and nurse consultations that will help people get the information and care they need more efficiently. We also have gain-sharing, so that when the physicians demonstrate they meet high quality standards in terms of preventive services and treatment of chronic conditions, and prove to us that they're not underutilizing services, they can share in some of the savings.
MH: Is it safe to say that fee-for-service medicine is never going to truly go away?
Cropp: I think it's safe to say that. When you realize that no payment model is perfect, and you think about what you want to incentivize and reward, and that there are some services you want to keep generating volume on, fee for service won't go away completely.
MH: Which of the products you offer has been the most challenging, and which offers the most financial promise?
Cropp: The answer to both questions is the same—Medicare Advantage. It has presented the greatest challenge, because in the short term, the government has cut back on the amount of funding going to plans. In certain areas that started out as relatively lower reimbursement regions, such as western New York, those cutbacks are difficult adjustments to make. But at the same time, Medicare Advantage represents the biggest opportunity, because there are efficiencies that can be brought to bear to improve the health of the Medicare population and squeeze out some of the waste in the healthcare system.
MH: What's your take on high drug prices?
Cropp: It's rapidly coming to a crisis point where it's the single biggest driver of the cost trend. So a different national approach has to be thought through. What's going on now is unconscionable and unsustainable when you see the generic price drug increases. One of the advantages of having our own pharmacy benefit management company and specialty drug company is the ability to work closely with the physicians to make sure we've got alignment between our formulary, our purchasing power, our use of the right medications, and minimizing the waste that occurs when people don't adhere to their medications.
MH: Are there certain drugs whose prices concern you the most?
Cropp: Two are hepatitis C drugs and the new cholesterol agents. In addition, multiple sclerosis drugs represent a significant challenge because they've been around for a while and you should see the prices falling, but it's exactly the opposite. Then you've got the other spot conditions like the new cystic fibrosis drug that costs $300,000 a year. And you often will see blood replacement products for hemophilia that can cost in the millions of dollars a year.
MH: How has health insurance changed from when you were a practicing family physician and not an insurance executive?
Cropp: The power of information has transformed the industry. When I practiced, every patient was unique. You never took a step back to see what your practice volume was like for certain diseases. You didn't practice teamwork.
Now, with the information that we have available to us, the insurance company can become a powerful and important partner in helping physicians understand what their population looks like, how well they're doing compared with the evidentiary basis for the conditions they're treating, and bringing resources to bear in terms of case managers and other tools to help physicians get better results.
MH: How problematic is it to manage all that information in terms of data security?
Cropp: It can be significantly problematic. It's one of the things that keeps me awake some nights. We have a very robust information security team, and we're constantly testing ourselves to evaluate the accessibility of our information. It's clearly an area of technology that's going to require significant investment on the part of plans and practices.
MH: What problem in healthcare do you think deserves more attention?
Cropp: There is tremendous profit-taking going on in healthcare, with the pharmaceutical industry being a prime example. There are many layers that get created because of the system's fragmentation. You've got for-profit technology players trying to help physician practices deal with some of the complexity. They promise to “relieve” the physician of the burden of doing that work—but for a fee. That's invisible to the public. But when you see Goldman Sachs and others taking a significant interest in providing services to the healthcare industry, you know there is future profit that's there to be taken.
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