New Marketplace

When Do Provider-Sponsored Health Plans Make Sense? Part 2

Interview · April 5, 2016

“I believe there will be a move to make Medicare fee-for-service residual much less attractive,” says Glenn Steele, Chairman of xG Health Solutions and former President and CEO of Geisinger Health System, as he and Leemore Dafny, Director of Health Enterprise Management at Northwestern University’s Kellogg School of Management, and Lead Advisor for the NEJM Catalyst New Marketplace, continue their discussion about provider-sponsored health plans. “If in fact you believe, as I do, that Medicaid fee for service will go away, then you have a choice of jumping into the Medicaid MCO business either with a very, very, hopefully trustworthy partner, or you get into the Medicaid MCO business yourself,” says Steele. It’s dicey, he adds, but it might be a reasonable bet. Listen to or read Part 2 of the interview below.



Leemore Dafny: This is Leemore Dafny for NEJM Catalyst. I’m here for part two of a series with Dr. Glenn Steele, former CEO of Geisinger Health Plan and current CEO of xG Health Solutions. Today, we’re continuing our discussion about provider-sponsored health plans, and this podcast in particular is going to focus on Medicare Advantage. So let me start with a burning question on the minds of many providers, Glenn, which is: why should they form a Medicare Advantage plan instead of just signing up for one of the many models of Medicare ACOs?

Dr. Glenn Steele: Well, first of all, I’m talking from my Geisinger Health System experience and we were blessed by having a Medicare Advantage program, which was a sweet spot, if you will, of a lot of our value reengineering, and a lot of the things that we did to decrease hospitalization per thousand. And the reasons that we choose to emphasize that as our kind of lead engine of innovation was based on our experience with PTP. We were in the precursor to the Medicare ACOs, which was the physician group demonstration project, and we hit all the quality bogies, but we didn’t make a single buck from that.

Now, we did it anyway because we thought it was exactly what we were doing for our Medicare Advantage program, but at that time we had four problems with the Medicare ACO. Number one, we didn’t agree with the patient attribution rules. Number two, we didn’t agree with the financial benchmarking rules. Number three, we didn’t agree with the way data was being shared between Medicare and us as a provider. And number four, we didn’t agree with the performance metric rules. Other than that, we thought it was perfect.

Dafny: What’s the most important of these objections, and have any of them been addressed in the current versions?

Steele: Things are improving. I think all of that is iterative. I think it’s improving, but a huge amount of the success or failure, and the predictability of success or failure, in the Medicare ACOs is going to be able to have and feel comfortable about having all of those four basic sets of rules adjudicated, and agreed to, and standardized. So that’s why we’ve bet on our MA — Medicare Advantage, essentially — and I truly believe that the ACOs will improve. I’m involved right now in efforts to really tighten up those particular rules that I think are critical for population-based payment. So that would be the long-winded answer to your question.

Dafny: Well, let me ask you this: [Does] being successful in managing the health of a commercial population translate automatically into doing well for the Medicare population? Or I could even ask that by vice versa.

Steele: I think there are a lot of overlapping capabilities that are important for both commercial and Medicare. I’m a little less glib when I talk about the Medicaid MCO. The last big bet that I made before retiring as CEO was 125, 130 thousand Medicaid managed care members coming into Geisinger. That’s a big bet, and the difference there, obviously, is the amount of non-medical aspects that are so important to be able to manage in order to really get higher quality and lower cost in terms of health outcome, and that’s never been a sweet spot for most great provider organizations, even organizations like Geisinger.

But I think for Medicare and commercial, I think being able to stratify the utilization carders, being able to actually reengineer your care depending upon the folks most likely to need intense care, being able to get the care out to the commercial high utilizers, as well as the Medicare high-utilizing patient populations without forcing them into the doctor’s offices or certainly forcing them into the emergency room — those are capabilities that I think can cross over. I think being able to define who’s on what part of the bell-shaped curve in terms of your provider efficiency is very important; being able to feed back to your providers so that there’s a closed loop in improving your utilization is similar. So I think certainly at Geisinger, when we reengineered our care, it didn’t matter to us whether that reengineered care was for our Medicare patients, for our Medicare Advantage patients, or for our commercial patients, or in fact whether our commercial patients were insured by Geisinger or insured by Highmark, Northeast Blue Cross, or Capital Blue Cross.

Dafny: Let me ask you a question sort of from a financial perspective here. In our last podcast, you suggested that provider systems contemplating forming an insurance plan try things out on their own employees. Might you suggest that the next population they try to hit be the Medicare population? Partly because of the great potential for savings, but also because they wouldn’t be cannibalizing such lucrative business, right? Traditional Medicare doesn’t pay too well. Other Medicare Advantage plans don’t pay too well.

Steele: I agree with you. I agree with you 100 percent. The other aspect, which is really a logical extension of what you said, Leemore, was the commitment — and I truly believe the commitment on the part of HHS and CMS — to get us to 50 percent non–fee for service by 2018, and so that capability has to be built in. Now, a corollary of that commitment, which is not stated by CMS, but which I believe is that there will be a move to make Medicare fee-for-service residual much less attractive so that the business model will swing toward either Medicare Advantage, or the ACOs, or the bundles, or what have you — all the things that are going to be moving us toward full risk for Medicare.

The other part of the patient population, which I think is similarly attractive depending on how much institutional chutzpah you have, is of course the Medicaid population. If in fact you’re already taking care of a significant number of Medicaid fee-for-service patients, and if in fact you believe, as I do, that Medicaid fee for service will go away, then you have a choice of jumping into the Medicaid MCO business either with a very, very, hopefully trustworthy partner, or you get into the Medicaid MCO business yourself. Now, that’s pretty dicey for a couple of reasons, one of which I mentioned earlier, but if you’re going from 50 cents on the dollar to 70 or 75 cents on the dollar by working on the payer and the provider side together to reengineer the health status outcome of those patients, it might be a reasonable bet.

Dafny: Less negative [is] still better than more negative. So you mentioned how the various lines of government business are lining up toward having providers bear more risk. The final question I wanted to ask you is, how do these ACO-like efforts overlap with other payment innovations like bundles? I’m a provider system. I’m trying to figure out how to survive. I’m working on developing plans where I take more capitated payments or potentially introduce an insurance plan. What do bundles do for me in the mix? Are they an added complication? Are they complimentary? Do they detract from population health?

Steele: Well, I think the practical answer to your question, Leemore, is that they allow options that various provider groups who are at various points in the capability curve feel comfortable in moving toward. Now obviously, if you were to move to full cap immediately with a public payer, you’d have access problems. And as I mentioned earlier, we’re still kind of iterating toward hopefully better core rules that are going to be important in defining and being able to predict success for as many of our providers as possible. But there’s no question that in this very interesting time of incredible commitment to giving more people access to insurance, and a huge amount of turbulence in the system moving from what had been for decades a commitment to fee for service to something else, you’re going to need to have different points in the journey that can entice different groups with different capabilities in. So I think that a portfolio of options, some of which, like for instance the bundles, or intermediate options, would be reasonable.

Now the key thing about the bundles, I’m sure you would agree, is the post-acute. The acute stuff should be relatively accessible in terms of reengineering. It’s not easy, but conceptually it’s very accessible. The real interesting and challenging step is as you take the bundles from the acute to the post-acute, and quite often that means a structural change in how the hospitals relate to the post-acute facilities. So again, that’s another step in the move toward what I believe is full cap.

Dafny: And I would add that there’s a great NEJM Perspective by Clay Ackerly and others, which outlines this problem, which is that providers don’t really know for the post-acute care what is likely to be the optimal course of treatment in the long term. So I think that we return full circle to where we began with our first podcast, where you said that providers have to unite toward the goal and will require a great amount of data and coordination to identify how best to get there, and that the insurance function is really subordinate to the primary objective.

Steele: Thanks very much, Leemore. You’ve summed it up nicely.

Dafny: Thank you very much, Glenn. Enjoyed the conversation and I expect the listeners will, as well.

Listen to or read Part 1 of this interview.

New Call for Submissions ­to NEJM Catalyst


A weekly email newsletter featuring the latest actionable ideas and practical innovations from NEJM Catalyst.

Learn More »

More From New Marketplace
Robert Gavin head shot

Amazon and CVS: Short-Lived Unicorns in Health Care, or Healers of the “Tapeworm”?

Will Amazon–Berkshire Hathaway–JP Morgan and CVS-Aetna change the health care game? To one health care employer purchaser, these announcements feel a lot like Groundhog Day.

Fiona Scott Morton head shot

We Can’t Spend All Our Money on Health Care

We have to think about how much we want to spend on health according to how much it’s worth to us at the margin.

Simplified Chain of Production for Primary Care Services Generating Retail Prescriptions. Solid arrows indicate contractual relationships or ownership, and the dashed arrow indicates referral for prescription.

Does CVS–Aetna Spell the End of Business as Usual?

What might one of the largest mergers in history mean for the health care delivery system?

Lack of Incentive Is Top Barrier to Implementing Value-Based Payment

Survey Snapshot: Payer-Provider Alignment Is Difficult Even for Integrated Organizations

NEJM Catalyst Insights Council members say stronger incentives and better use of analytics could improve alignment.

Kaplan04_pullquote Time to Sink Two Canoe Payment Models Argument

Time to Sink the Two-Canoe Argument

Although the transition from fee-for-service to quality-based payment can leave physicians feeling trapped “with a foot in two canoes” while straddling the two payment methods, there are compelling ethical, professional, and business reasons against rationalizing continued support of fee-for-service medicine.

Mostashari01_pullquote - Medicare Advantage Holds the Key to Reforming the ACO Program

Medicare Advantage Holds the Key to Reforming the ACO Program

Value-based care continues to be the emphasis of federal policymakers, as well as many providers. Aligning Medicare Advantage with ACOs would boost both programs.

Physician Group Practices BPCI Classic Success and Looking Ahead to BPCI Advanced Bundled Payments

Physician Group Practices: Succeeding in Bundled Payments

Physician groups are demonstrating their ability to deliver care in new and innovative ways as part of the nationwide effort to transform health care delivery through value-based payment models. The physician experience and perspective is invaluable and should remain an important component of any shift to value-based care.

How Aligned Are Payers and Providers in Working Together to Achieve Value-Based Care

New Marketplace Survey: Payers and Providers Remain Far Apart

Health care stakeholders are not aligned in important goals and in large part are not working together to achieve value-based care, according to the NEJM Catalyst Insights Council. They are waiting on government regulators to change the payment model — including, possibly, single-payer health care.

Comparison of Select Characteristics of the Sample and Shared Savings Program - MMSP ACO - Physician-Led ACOs

Do Independent Physician-Led ACOs Have a Future?

While some of these smaller organizations are succeeding, they do face numerous challenges, and there is a need for both regulatory change as well as greater sharing of peer-based resources and best practices.

Disruption of Innovative Mergers in Health Care Industry - BDO graphic

Innovative Mergers Will Disrupt Health Care

The NEJM Catalyst Insights Council expects outside players to have a major impact on the industry over the next three years.


A weekly email newsletter featuring the latest actionable ideas and practical innovations from NEJM Catalyst.

Learn More »


We Can’t Spend All Our Money…

We have to think about how much we want to spend on health according to…

Primary Care ACO Models: Way of…

Evidence shows that primary care–led, risk-bearing, ACO-like practices and independent physician group models generate more…

Amazon and CVS: Short-Lived Unicorns in…

Will Amazon–Berkshire Hathaway–JP Morgan and CVS-Aetna change the health care game? To one health care…

Insights Council

Have a voice. Join other health care leaders effecting change, shaping tomorrow.

Apply Now