Blue Shield of California CEO shares ACO success secrets


Insight from Paul Markovich, CEO, Blue Shield of California

Since the implementation of the Affordable Care Act in 2010, accountable care organizations (ACOs) have rapidly transformed from a new-and somewhat confusing-concept, to a wide-scale reality. In fact, it was just a few years ago, in December 2011, that CMS announced the 32 organizations that would participate in its Pioneer ACO Initiative. A few months later, came the Medicare Shared Savings Program (MSSP). Today, hundreds of ACOs, have cropped up across the country.

But while the ACO model is becoming more established, many ACOs have struggled, and others have failed. So what has made some more successful than others? In this Q&A with Managed Healthcare Executive (MHE), Paul Markovich, CEO, Blue Shield of California, discusses the organization’s approach to shared savings, highlights some of its successes, and shares some of its biggest lessons learned.

MHE: In December 2013, Blue Shield had 12 ACOs covering 204,000 members. Today, it has more than 35 covering more than 325,000 Californians. What are some of the biggest drivers behind that massive growth? 

Markovich: We believe that achieving the “Triple Aim” of lower costs, improved clinical quality and a better patient experience requires both “will” and “skill.” “Will” comes from sharing the risk on a global budget and specific cost and quality goals.

MarkovichThis shared risk financial mechanism rewards hospitals for, among other things, keeping members out of the hospital. As a result, hospitals are motivated to work with us and the physician group to do things such as re-engineer the discharge planning process to reduce the 30-day inpatient readmission rate. Physicians have similar incentives.

Being motivated to achieve the “Triple Aim” is not the same as actually achieving it.  ‘Skill’ is required as well. We have developed this with our partners through a large team exclusively dedicated to operating the ACOs. This team works jointly with each of our partners to analyze up to three years of historical data, determine the best target opportunities, develop specific target goals, create initiatives to achieve those goals, oversee their implementation, track and report performance and, based on that performance, recommend additional goals and initiatives. All of this requires specific capabilities including analytics, end-to-end process redesign, project management, data integration and management and effective governance, just to name a few. Our growth can be attributed to the sustained success of the model and our ability to trace that success back to the “will” and “skill” we have created. Providers understand that this is not a fluke but a result of a systematic effort.

Next: Which ACO structures are most successful?



MHE: ACOs come in various shapes and sizes, and Blue Shield has more than three dozen of them. What do these ACO structures typically look like? Have you found that a certain formula is more successful than any others?

Markovich: While the specific details of our ACOs may vary, we believe any successful ACO needs to adhere to some core principles, which include: strong philosophical alignment with top management, shared long-term objectives, aligned incentives, transparency and resource commitment.

The CEO and senior team at our hospital and physician partners need to fully buy into this approach because there will be bumps in the road and challenges to work out. This requires an unwavering commitment from the top.

The shared long-term objectives are important because we do not want to experience a divorce with an ACO partner in year two or three over a disagreement on how aggressive we need to be on improving cost and quality. The aligned incentives are core to creating “will,” and transparency is critical to creating trust and an objective scorecard to rate our collective performance.

Finally, this is a heavy lift. We are actually changing the way care is delivered and you need smart, dedicated, capable resources on the ground to own it and drive it day-to-day.

Next: What is making the program so successful?



MHE: Blue Shield’s ACO program, created in 2010, has achieved more than $325 million in healthcare cost savings in its first five years. Many other ACOs, however, have had a more difficult time. What do you think is making your program more successful?

Markovich: Our commitment and trustworthiness. From the Board down to the front line, we believe that developing deep, technically integrated partnerships with providers is the way we will ultimately create a healthcare system that is worthy of our family and friends and sustainably affordable.

This ACO program is core to our strategy and to fulfilling our mission of helping to ensure Californians have access to quality, affordable healthcare. We have put substantial, dedicated investments into it, we set company-wide goals each year to improve it, and I personally spend a significant portion of my time on it.

That commitment is clear to providers and reinforces the notion that we are in this for the long term. As a result, when things go wrong, and inevitably with something this difficult and complex something always goes wrong, everyone knows it is our job to address the problem because we are staying the course. Adversity begets adjustments to the program rather than abandonment of it.

We also work hard to create trust. Our provider partners see all the details associated with the program, including all the components of the healthcare budget and our pricing model. We share with them what has worked, what hasn’t and what we plan to do about it in an open, straightforward and proactive manner.

We are not perfect-no organization is-but it is clear to our partners that our method of operating is to be transparent and foment trust. That is also critical to working through what will inevitably be challenges for any ACO. 

Next: What resources do you provide to ACO participants?


MHE: Data analytics capabilities and care coordination are often cited as big gamechangers when it comes to ACO success. Do you provide any resources, monetary or other, to assist ACO members with succeeding in these areas?

Markovich: Yes. One of the things I often say is that ‘a bad system beats good people.’ We have a bad healthcare system in that we have a lot of misaligned incentives that make it difficult for well-intentioned people to do the right thing. Our job is to create a ‘good’ system which includes investing in the appropriate capabilities.

Since the inception of our ACO program, Blue Shield of California has contributed significant resources, program management, data analytics, clinical resources, pharmacy program management and more. This, we believe, has absolutely been one of our critical success factors. These resources are working shoulder to shoulder with our providers to develop new processes and to implement clinical interventions. We also expect these investments to increase in the coming years. For example, we are working with some of our ACOs to establish high risk or post-discharge clinics, and have also helped build hospitalist and other programs that will continue to reduce costs and improve patient care and experience.

In addition to the ACO investments we make as a company, the Blue Shield of California Foundation focuses on improving systems of care in the healthcare safety net and one of many things it offers is strategic grant funding for solutions that contribute to transforming the healthcare system.  For example, the foundation’s support enables medical providers to use new technology such as electronic consultation, video, and tables, to more easily connect with specialists and better coordinate care. 

MHE: Are there any mistakes you made along the way in forming ACOs that you think others can learn from?

Markovich: We’ve made more mistakes than I can count but that is the nature of doing something new. I would simply reiterate some key themes. Specifically:

  • The need for strong philosophical alignment within your organization and with provider partners;

  • Shared long-term goals;

  • Aligned incentives;

  • Transparency (and the trust it foments); and

  • Resource commitment.

The only other thing to add is persistence. This is hard work and it will not always go as planned. There is a lot to be said for learning from mistakes and sticking with it.     

One other piece of advice is to figure out how to establish a real-time, digital, secure, longitudinal patient record. The long-term success of ACOs depends upon our ability to bring healthcare into the digital age and fully leverage the immense potential of technology to change healthcare delivery. We are attempting to do so with the California Integrated Data Exchange (Cal Index), a not-for-profit organization that we jointly founded with Anthem Blue Cross of California.

Next: What role do you think ACOs will play 10 years from now?



MHE: Ten years from now, what role do you think ACOs will be playing in healthcare delivery?

Markovich: In 10 years, the vast majority of healthcare will be delivered in provider networks that embrace the principles described earlier. They may or may not be called accountable care organizations and there may be many variations on the theme, but the vast majority of Americans will be receiving care in a system that embraces these principles. 

This is virtually inevitable due to the absolute cost of health insurance today and the fact that extrapolating healthcare cost trends in excess of wage and price inflation over the next 10 years make it unaffordable to the majority of customers.

The market is going to gravitate toward models that are sustainably affordable. 

MHE: If you could offer ACO leaders one piece of advice, what would it be?  

Markovich: Stick to the principles. No matter what. The sales team may say they can’t sell the network without certain providers included, providers may threaten termination or otherwise try and convince you to do an ACO without truly aligning incentives, and your internal teams may give you dozens of reasons why this won’t be successful.

The only way to ultimately be successful with this is to commit to the principles and stick to them. There is plenty of flexibility within the principles but compromising on them is a surefire path back to the status quo as opposed to creating a healthcare system that is worthy of our family and friends and sustainably affordable.

Aubrey Westgate is executive editor of Managed Healthcare Executive.

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