Q&A: CFO Karen Hanlon says Highmark is moving past the UPMC conflict

For nearly a decade, Highmark Health and UPMC were embroiled in a high-stakes, high-profile dispute over market power in Western Pennsylvania. Their fractured marriage comes to an end June 30. Highmark Health Chief Financial Officer Karen Hanlon told Modern Healthcare finance reporter Tara Bannow at the J.P. Morgan Healthcare .Conference in San Francisco last month that the issue is already in the “rear view mirror.” Instead, she's focused on furthering Highmark's evolution toward value-based care delivery, finding ways to bring down the cost of drugs and transitioning to her newly created role of chief operating officer. The following is an edited transcript.

MH: When you look at 2019, what are your biggest financial goals? What are your top strategic priorities?

Hanlon: We are both payer and provider. We cover about 5 million insured lives. We own Allegheny Health Network. We have an interest in Penn State Health. So it's really about continuing to advance that integrative model and move further down the path around our value-based care activities.

If we do that, the financials will take care of themselves. It's about continuing to find ways to increase quality and lower cost.

MH: Do you have specific targeted ways that you plan on doing that?

Hanlon: We have an entire clinical transformation effort that's being led by Dr. Tony Farah, chief medical officer at Highmark Health. He's working in partnership with our health plan people and our provider people, including at Penn State Health, on a wide array of activities.

At the beginning of last year, or the end of 2017, they rolled out an enhanced complex-care model, which takes the highest-acuity cases—they have at least six health conditions—and more proactively engages with them around managing their care.

We'll keep expanding that to more of the population, because honestly, we started with six or more conditions just because we could only manage a certain number of people.

We have an entire set of efforts around something called Right Care, which involves clinically approved best practices around efficient delivery of care. They continue to look at those and roll them out broadly across all of Allegheny Health Network.

MH: What are you doing in terms of working to lower premiums for your members?

Hanlon: We make sure that our care transformation activities are showing the results that we expect them to show, and then, assuming they're reducing costs, we pass that right through in pricing to the customer.

The benefit of being a not-for-profit is it's part of the mission, right? It's part of what we're trying to do.

MH: You've entered into valued-based drug-pricing contracts. Do you see that growing?

Hanlon: We do. Pharmacy 
in general, we've got to 
figure out how to deal with it, as a healthcare system. 
So I do expect that will continue.

MH: Can you name a specific disease that you might target, or a drug?

Hanlon: I don't want to name a specific one because there are a few that we're working on right now within our pharmacy group. It's the criteria that you'd expect: the highest-cost items where you're not sure of efficacy and if you're going to pay for it, you better get the outcome that was supposed to have been delivered.

Allegheny Health Network just joined Civica Rx. We're trying to do more through Allegheny Health Network on that side as well. Certainly the shortages are a part of it, but the cost is, too.

MH: What will joining Civica mean for you?

Hanlon: Allegheny Health Network will be one of the founding members. There will be input into what generics should be considered for rollout within Civica.

MH: Do you feel like issues with UPMC have created an image problem with patients or members?

Hanlon: In Western Pennsylvania, because it's a very local issue. Once you move outside of Western Pennsylvania people don't talk about it so much.

It's just something we have to balance because our businesses go well beyond Western Pennsylvania. In that part of the state, I think consumers have been hearing about it for six years. They are ready for this next stage and to not have to be hearing about the end of the contract between two parties. And we're ready to go.

For us, that's really kind of in the rearview mirror. We've built up Allegheny Health Network and it has been competing effectively. We're seeing the results that we want to see. They have refreshed assets, they have new assets. We're ready for it to compete.

MH: How does being an integrated system position you to address the trends in consumerism?

Hanlon: When you think about the real delivery of care and the data around it and the insights and improving care through the data—whether it's a video visit or an in-person visit—I don't think there's anything that differentiates us just because we're an integrated system. But we've dealt with the payment mechanism of it.

From a consumer standpoint, what we're talking about is making care as accessible as possible, as high-quality as possible, and at an affordable cost. On accessibility, the video visits are huge.

MH: Lastly, one of the things that seems to happen at the J.P. Morgan conference is that people are almost using it like a recruiting event. Do you view it that way?

Hanlon: I don't. But as I say that, I'm transitioning from the CFO role to the COO role, and I can't fully transition until I replace myself.

MH: So you don't have a specific effective date?

Hanlon: Right. We've been recruiting. The announcement was made in July and I've been doing a little bit of both jobs, but we need to recruit a CFO. I have actually had a number of discussions since I've been here (at the J.P. Morgan conference) about, “Hey, we're looking for somebody,” and people have given me names, they're sending me emails, so I laugh and say, “No it's not recruiting,” but it has been a little bit for me.

On the clinical side, and we see it at Allegheny, the systems that declare their commitment to quality, their commitment to the patient, their commitment being clinician-led … have physicians who want to come work there because they feel that it's an environment where their opinions are going to be heard, that they're going to be valued, their ideas will be embraced. It does make a difference.