J. Kevin Croston, MD, the CEO of North Memorial (left) and Craig Samitt, MD, the CEO of Blue Cross Blue Shield of Minnesota, think they have figured out how a provider and payer can work together.
In June, Blue Cross Blue Shield of Minnesota and North Memorial Health, a health care system anchored by a 353-bed hospital in suburban Minneapolis, announced that they were forming a partnership to own and operate 20 primary and specialty clinics that were formerly owned just by the North Memorial system. To form the joint venture, North Memorial agreed to sell a 49% stake in the clinics to the Minnesota Blues for an undisclosed sum. Other insurers are also entering into partnerships with providers or buying them outright, further blurring the line between payer and provider. We interviewed J. Kevin Croston, MD, the CEO of North Memorial, and Craig Samitt, MD, the CEO of Blue Cross Blue Shield of Minnesota, about their joint venture.
So who approached whom first about this deal?
Croston: I actually approached Mike Guyette
We had had the typical relationship in a fee-for-service–based world, and we were trying to figure out, at that point, how we could relate together in a more meaningful way. We started talking about a bigger overall alignment. Then, Mike left to go to another job, so the deal went on pause until Craig arrived. Craig got here and obviously needed time to get around, see where he was at, make some decisions about what was next. Again, we started talking about the relationship that we have now.
I would say that while it might have been my idea to align us better, Craig certainly had a really clear vision of where he wanted to go, and we landed in a really good spot as a result of that.
Samitt: I think you covered it well. I would add that this was actually a highly mutual decision by both organizations, and it stemmed from the fact that there are two things that became very clear early that we have in common. One is a passion for our mission, and the other is a passion for reinvention of health care.
Rather than enter into a joint ownership, couldn’t you have stayed in your separate camps and arrived at value-based contracts that would have accomplished the same thing? Why joint ownership?
Samitt: I don’t think that would have been sufficient for us to simply enter into a more advanced value-based payment arrangement. I think we’re seeing some examples of that in other places around the country, and it’s still not in and of itself driving the types of quality outcomes, service improvement, or cost reductions that we want.
Blue Cross is not getting into the hospital business, and North Memorial is not getting into the health plan business. But the importance of the joint venture is that we’re both, together, creating what we think the future of care delivery should look like.
We would not have been able to do that if all we created was an enhanced shared savings, or even a risk-sharing model between our organizations.
Croston: Let me jump in a little bit.
I think there are lots of examples of value-based relationships—to Craig’s point—around the country that aren’t delivering on results yet. Now, might they get there down the road? Possibly.
But in this community, there hadn’t been any evidence that you could align the incentives of the health plan and providers so that when both succeed in delivering the high-quality care and actually reducing the cost of delivering care, that both benefit.
In order to sit down and have trusting conversations with a new idea, you need to be in the same boat, rowing in the same direction, going forward.
Samitt: What I would also add is that the primary objective for this partnership is to deliver better care at a lower cost, and to focus on what the consumer wants from health care that they’re not getting. We’ve talked about the fact that health care is complicated and fragmented. If all we did was simply stay in our own camps and have a new form of contract, we’re not creating an easier, more aligned, more integrated, more facile solution—with the customer at the center.
These are 20 existing primary and specialty care clinics, correct? And patients with other sorts of coverage besides Minnesota Blues are seen at those clinics. Is that going to change?
Croston: We’ll continue to see people with all varieties of insurance. And I think the unintended consequence of this, which is a good consequence, is that those patients that have other forms of insurance that are being seen in our clinics are still going to benefit from the learned behavior and the customer service experience that we’re able to deliver with the Blues.
Samitt: This is beginning with our two organizations, but it’s not going to end with our two organizations. We actually hope that this partnership catalyzes a broader transformation of health care in Minnesota. Ideally, this is just the beginning or epicenter of something that we hope will happen more broadly.
Croston: Let me add something. We’re a billion-dollar company, so we’re really small. And I have not previously really been able to engage in solving the health care problem because of who we are. I’m busy keeping my ship afloat. But an opportunity to do something transformational to the system, the synergies that we get from partnering with Craig and BCBS, puts us in the middle of that game going forward.
The press release about this new venture mentioned a 20% overall cost savings over five years as a result of this joint venture. Can you lend some specificity to how you’re going to accomplish that beyond the generality about transformation and all that good stuff?
Croston: Here’s a couple things that we’ve talked through. First, by virtue of simplification of the process for the customer, we’re going to create less administrative burden by cooperating and collaborating on how we’re going to provide care.
Second, by combining our databases and using the data that’s already available but has previously not really been shared freely back and forth between organizations, there are going to be outcomes and clinical pathways developed that are going to streamline care so that what’s supposed to happen happens all the time.
Are there any particular type of patients that you’re going to focus on? Any particular interventions or any SDOH efforts that you plan on rolling out in the early part of this?
Samitt: The model of the joint venture is focusing on all the patients that we serve, so we’re not being specific about caring about any segment of the population.
Will this new entity have a different name from Blue Cross Blue Shield and North Memorial to let people know that it is its own thing? Do you plan to brand it in some way?
Samitt: I think it should be Croston Care! [Laughter.] I think right now, the current brand, the North Memorial brand—given that that is where the predominance of the services are provided—will stay. I don’t think we’ve crossed the bridge of when and if we would rebrand. It also depends on the pace of growth or the character of the evolution of this model.
The other value of this partnership is that each of us have other assets to bring to bear that makes this JV [joint venture] stronger. North Memorial has the largest EMS system in Minnesota, and Blue Cross has a mobile care delivery organization called Livio. So, we may want to re-evaluate naming as the very nature of the JV evolves over the coming years.
And will this entity have its own budget, its own calculation of revenue versus expenses, and therefore be judged as a tub on its own bottom?
Samitt: It’s an organization that will be its own business unit, that will have its own CEO, a dedicated board of directors, and most certainly will be evaluated for its performance distinctly from either of the two parents.
The 20% cost-savings figure that you’re putting out—does that pertain to this whole unit and all the patients that it will have? Or does that 20% only pertain to the BCBS members who will be seen at “Croston Care”?
Croston: I would say that what we’re going to be able to measure through our partnership—initially, at least—is going to be the experience of the Blue Cross patients in the North Memorial Health System.
Part of what will be a great outcome for us will be to actually promote wellness and hopefully prevent some of the illness that could be prevented. So, it should reduce hospitalizations.
And while going to the hospital when you’re sick and need highly efficient expert clinical care is a good outcome, not going to the hospital is an even better outcome.
That would seem to create a tension—the goal of keeping people out of the hospital, because aren’t you, North Memorial Hospital, going to end up with a lot of empty beds if these clinics are getting incentivized and organized to keep people out of the hospital? It would seem to spell trouble for North Memorial Health Hospital.
Croston: But what you’re speaking to is exactly the dynamic that’s created the cost curve that we’ve had to date. So, it will be our job to right-size the inpatient facilities. I can tell you that despite our best efforts, there’s still going to be sick people, and they’re still going to need highly efficient, highly complex care when they need it, and we’re going to be there to provide it.
If the outcome is that we aren’t filling our hospital beds and we have to downsize to accommodate that, that should be a win for our community. It’s still a win for our organization. Now we’re inspired and incented financially to deliver on those results, as opposed to the way we’re currently functioning.
Samitt: I would very much love to see all of the plans and all the health systems in Minnesota have a similar point of view about right-sizing our facility capacity. The reality is, to Kevin’s point, we have an aging population that’s likely going to have greater clinical needs in the future. This may actually be a strategy by which we don’t have to add additional hospital beds. Let’s manage care through the capacity that we have. And these types of strategies should begin now, so that we’re not addressing growing health care needs of an aging population by adding even more hospitals in Minnesota’s future.
How much did this 49% ownership stake cost BCBS?
Croston: I think this is where I jump in and say, not nearly enough! But I’ll leave the rest to Craig.
Samitt: We’re not revealing the financial terms of the partnership. And again, we believe this investment is a crucial one to catalyze the transformation of health care in Minnesota. I also believe this investment is just the beginning.
Why aren’t you disclosing it—the financial terms?
Samitt: We’re not for profit and we don’t believe that the financial terms of the relationship are material to what’s more important, which is the strategic intent— and the fact that this is going to be a very different type of model between payer and provider than we’re seeing in other markets.
Croston: I think Craig said that very nicely, but I’m the one selling the 49%, and I would tell you that the sale price was inconsequential relative to the relationship, from our standpoint.