Shared savings don't go far enough in accepting risk

Since 2012, Catherine Jacobson has served as president and CEO of Froedtert Health, a nearly $2 billion regional health system based in Milwaukee. She became president in 2011. In partnership with the Medical College of Wisconsin, Froedtert has a network that encompasses an academic medical center, two community hospitals, a community medical practice with more than 240 physicians, and Medical College Physicians, a multispecialty practice plan with more than 750 providers. A year ago, Froedtert partnered with Ascension Health to acquire a 50% ownership interest in Network Health, a 165,000-member health plan with nearly $900 million in premium revenue. Jacobson said the joint venture was created to better prepare the health system for the world of financial risk contracts, building on the skills and expertise of an established health plan. Jacobson previously served in various senior leadership roles at Rush University Medical Center in Chicago. Modern Healthcare reporter Melanie Evans recently spoke with Jacobson about the goals of the joint venture, her system's Medicaid experience in a state that has not expanded eligibility under the Affordable Care Act and its leap into the insurance exchange. This is an edited transcript.

Modern Healthcare: Why take an ownership interest in a health plan? What are your strategic goals for that acquisition?

Catherine Jacobson: What led us there is the history that we've had with our clinically integrated network, Integrated Health Network of Wisconsin (IHN). We began IHN in 2010, and essentially wanted to build a clinically integrated network of independent health systems that initially would be able to take value-based reimbursement and later be able to take financial risk. That grew rapidly for us. We were fairly successful in getting some shared-savings contracts with insurers. Today, IHN is managing about 200,000 lives. We realized that strategy was probably unable to take us as far as we wanted to go in accepting financial risk for patients in a variety of different commercial insurance products, Medicare Advantage and the public exchanges.

So we did a market analysis on whether and where provider-sponsored health plans could be successful. Wisconsin is one of the leading states in its prevalence of provider-sponsored plans. So there were a lot of health plans for us to choose from in terms of partnership.

We knew from the beginning that health systems do not have the capabilities on their own to run insurance companies, so we knew that partnership would be a route that we wanted to take. We came up with a short list of what we considered the best-performing health plans in the state, and also those that aligned with our priorities of where we wanted to go in terms of assuming risk.

It just so happened that Ascension's Ministry Health Care, which owned Network Health, became one of our IHN partners. The synergy quickly came together between the two of us to partner around the health plan. We are now in the process of expanding the health plan's footprint into southeastern Wisconsin, where it wasn't before. Network Health exclusively uses the IHN provider network in that area.

MH: What percentage of your revenue is derived from risk contracts, and how do you project that to change?

Jacobson: For Froedtert Health, it's actually a very small component, and today none of those contracts are full risk. They're mostly shared-savings and pay-for-performance contracts, either directly through Froedtert Health—predominantly Medicare—or through IHN, which is where we've pushed all of our value-based payment contracts. We're somewhere in the range of 2% to 3% of our total revenue now being risk-based.

Network Health is separate from that. Considering our 50% share of Network Health, we are at full risk for all of that, so you're talking about $450 million in revenue. It's just that we're running it in two separate companies.

So, in one company we're all in on risk, with a pretty large health plan. Then, on the traditional healthcare delivery side, it's a very small percentage of our $2 billion in revenue.

MH: Wisconsin did not expand Medicaid eligibility under the Affordable Care Act but nevertheless has seen an increase in adult Medicaid enrollment under the changes to the state's existing Medicaid waiver. What has been your experience with Medicaid since the passage of the ACA?

Jacobson: Particularly in Milwaukee County, we've seen a significant expansion of Medicaid coverage, and we've been the single biggest piece of Wisconsin's additional Medicaid coverage.

All of the providers that serve the residents of Milwaukee County have seen a significant impact in terms of additional Medicaid patients. It's been predominantly a shift in uninsured patients we had before, for whom we were basically receiving no reimbursement. Even though we still lose money on Medicaid, at least we're getting something for treating these patients. That has been a good thing for our community to have more people who are covered and who feel like they have more access.

In Milwaukee County, all the healthcare organizations have come together in an organization called the Milwaukee Health Care Partnership to deal with the issues of the uninsured and the underinsured. We've experienced a significant increase in emergency room utilization since we've seen additional Medicaid enrollment. From what I hear from other markets, that's not unusual when that expansion happens.

So we are rapidly looking for ways we can expand the programs we already have in place. We had some pretty robust initiatives moving people from the emergency room to medical homes, working with our local community health centers. Now we're looking for other ways to expand access.

As we all know, coverage does not mean access, so we're trying to develop that additional access through expanding our community health center capabilities.

We recently made a $12 million commitment to an additional community health center, so they can open a new site in an underserved area of Milwaukee. There has been a lot of activity around that. Particularly in the past 24 months, we have seen that expanded coverage come to our community.

MH: How does Froedtert Health compete for new patients who have gained coverage through the exchanges? Are you working with commercial health plans on benefit and network design to compete for marketplace business?

Jacobson: The public exchange was a big reason why we made the investment in a health plan. Through IHN, we do have a contract with a commercial insurer on the exchange that is going to be competitively priced. For 2016, Network Health also is entering the public exchange in both the southeast and northeast Wisconsin communities, and it is also very competitively priced.

The network we use is not an all-inclusive broad network. It is our Integrated Health Network. We believe in that way we can add the most value and the most care coordination for that population. We are anxious to see that contract get underway and that enrollment start.