Trevor and Steve sit down with Andrew Dreyfus, President and Chief Executive Officer for Blue Cross Blue Shield of Massachusetts, one of the largest independent, not-for-profit Blue Cross Blue Shield plans in the country serving nearly 3 million members.
United States


00:00:10Healthy dose as a Bi weekly podcast hosted by Steve Krause Popcaan partner at Bessemer Venture partners and Trevor Pryce video, epoxy and partners and general partner of town hall ventures in various aspects of healthcare and have a personal stories entrepreneurship investing and have a few laws been at each other's expire.
00:00:57All right and Dreyfus, I love this podcast you love this guy. He's great the great human being clearly greatly like you want to go work for him right super Broad and deep when it comes to all aspects of Health Care policy and Healthcare. It's not like he went from like talking about every single corporate structure of every single blue which I guess you should know but literally. Is it a co-op is a for-profit. Is it a new every single states to like could speak endlessly about the pros and cons of Obamacare and Medicare for all in his head leaders on this podcast who were far more political far more measured Yahoo! Run far less high-profile companies that are far smaller. And we took him all over the Spectrum handled it all with transparency. It was amazing is this it wasn't like he had to like frame is no maybe we're asking really easy question, but he was like
00:01:57Senator from Meijer like I don't know about you like sometimes he's podcast for checking like we got five more like can you please leave us alone? He is great, Massachusetts is a state is an incredible health care, what kind of microcosm and he is a hugely is a real Bostonian as opposed to you. All right. Listen to Bostonian. This guy is like a leader in our city and a leader in our city leaders in healthcare there for you to leave in the nation help your break up. Thank you, Andrew.
00:02:52All right. We're really excited to have Andrew Dreyfus on the healthy dose a I get the pleasure working Andrew as part of our being part of the investment Committee of Blue Cross Blue Shield, but he's a guy that I admired for a long time as someone who really loves Healthcare at it. Say Andrew is one of the most Progressive thinking leaders in healthcare who and in Massachusetts will talk about is a model for Progressive American Healthcare politics and policy in Andrew's been involved in many different areas. So we're really excited to be here by the Boston. They probably wanted to be fed Williams. They don't think about growing up to be a healthcare insurance CEO childhood. And what you doing at this point will I did grow up in the Boston area and was very tied to the city and both my parents were born in Boston all my gram.
00:03:52Parents were born in the Boston area as well and grew up here. So I felt a great sense of location here kind of paradoxically. My father was a Property and Casualty Insurance executive for a small brokerage firm that he co-owned and he always wanted one of his three kids to go into the business and we all kind of said Insurance. You got to be kidding me and all of us to the most part study the humanities, I've had a literature and philosophy in college. And so I think insurance was the farthest thing from my mind when I was growing up. This was the age of Water Gave and kind of crusading journalist, and I wanted to be a reporter and I was the editor of my high school newspaper and I work for a college news office and my first job out of college. I was the editor of still going a weekly newspaper in one of Boston's Most Interesting neighborhoods the sense of South End of Austin.
00:04:52News about the news I was the second editor six months into its existence and did that for a for several years and it was still one of the best jobs I've ever had. That's awesome get from newspaper Editor to a head of one of the largest Blue Cross Blue Shield. It was not a traditional path. And so after a few years of being a journalist and being an observer, I wanted to be more of a participant and what happened was I won Governor Michael Dukakis was elected governor of Massachusetts and I joined his administration first kind of project manager working on a whole series of Human Services issues during that period Healthcare did become very hot issues. So it was the early phases of the HIV epidemic. It was the area where people started to realize that we were kind of mistreating people with mental health problems and addiction problems kind of warehousing them institutions.
00:05:52It's one Health Care Cost Containment started to become a big issue and eventually wear coverage and access became a big issue and in 1988 our state legislature at the governor surging past the first Universal Health Care law one that was later repealed. But gave me a taste of both the intricacies of American Health policy and the the potential promise of covering people without insurance. And so I kind of gravitated to health policy when I was in the administration gets out. She obviously don't have a read on every kind of state healthcare administration, but it feels to me when I come to think through my head of people who've worked in Massachusetts State Health Care, how many of them have gone on to pretty high impact rolls in the private sector. The reason for that is that you are actually in in this is one of the reasons I advised graduate students.
00:06:52Young people in their career to go into government because a you got kind of a really wide perspective you come and get this wide-open aperture on what's going on in healthcare, but you're also given significant responsibility at a fairly young age. If you demonstrate Talent, you can have a lot of kind of management and administrative training that's harder to earn I think in some ways in the private sector and sometimes slower Progressive universities that are pretty deep in healthcare policy, right? I mean you guys have a pretty Progressive Health Systems, I mean granted that is actually being academic in their thought and creating policy meeting thinking around Public Health that's happening. You know, why the people who formulated Obama policies rightful Dhat advancement?
00:07:52But I think you're both making is there has been especially in the last decade kind of history of bipartisanship which stands in stark contrast to what goes on in Waddington. Where is kind of partisan gridlock and paralysis and as a consequence of that you had we have a state reform law that was passed in 2006 that more than a decade later is still operating successfully. Let's tackle if you don't mind and I got to get to the federal level cuz we're recording this on with what's April 25th of April 22nd. I believe Alex Azar Seema Verma Adam boehler came out with the primary Care's in the dryer and we talked about the gridlock in the animosity between the parties, but what's interesting to me is if they are like seriously reaffirming and in fact, maybe really being major Catalyst for a lot of what was not necessarily the public Persona of the Affordable Care Act, but was very much the intent of the Affordable Care Act which was shipped to value and they are taking that and they're pouring gas.
00:08:52Market right now and that is interesting coming from in value-based care seems to be very much of a bipartite and agree with you completely and it's very exciting because exactly as you said the kind of moving from the FIFA service system to evaluate reimbursement system was one of the big tenants that was probably not fully understood in the Affordable Care Act and exchanges and death panels and maybe actually when we look at it when you're 30 years from now, it may be that he is starting to look back and see that and initially in the Trump Administration. There was a lot of questions in the field and in Washington about whether the new Administration was actually going to swallowed it in the price as well and that cost him but I think cuz I don't think because of some of his lobbying initiatives and who he represented in terms of the American Medical Association.
00:09:52By the way caused a huge Paws in the market for 12 to 18 months kind of post-election until very recently and I completely dislike Scott scared me a little bit of around the country and we definitely felt it. And when I was talking to other Blues CEOs are all I'm not sure we're really moving in that direction and then starting with zero burden, but then we lie when secretary Azar came in and the hiring of Adam boehler really sent a message and they have been systematically. Yeah. I kind of have a slightly different perspective on it then a let's say Hillary Clinton administration might have cuz I don't I think it's a little less government oversight. It's a little more trying to look to the private market for Innovation. It's probably a little more disruptive to be honest with you.
00:10:52Which I think could be a good thing and wanting to kind of accelerate on the other hand. They've also been uniting in a disappointment for me kind of Fairly aggressive and not trying to support further expansions that were called for the ACA. So they take a different and and some of the experimentation around work based programs and things like that actually look to be kind of limiting expansion. They've been defending Outreach and enrollment efforts and some other things so, you know it from my perspective. It's a mix of you but definitely on the value-based payment and I've had a chance to talk to secretary Azar couple times and he's clearly committed to it and I think you may know that a few years after our state reform law passed in 06. We had already begun working on a value-based payment model, which was is so old at this point that it was developed before the phrase a CEO was coined by Elliott Fisher.
00:11:52It's the most heavily evaluated and one of the largest commercial piriformis. Just trying to view Patrick Conway right before he's about to start at Blue Cross Blue Shield, North Carolina. And he said this is about a year-and-a-half ago. He said he wanted to get like 50% of his members to serve you see right within two years in like 90% within five years. Where are you in Massachusetts? Now, you're 10 years into it yet. So we are actually a little more than that. So first of all it from a provider perspective 85% of primary care physicians in 89% of specialist now except this value base form of payment from Blue Cross Blue Shield Massachusetts terms of our membership is less than that probably closer to 1/2, but it's very significant and growing and it's now kind of the standard way with that we pay for care and this is a global or This Is Us
00:12:52I said that if anyone use the word capitation, I would find them in the company just because it had such bad associations with kind of California and Managed Care in the 80s and 90s, but it is a fixed per member per month payment that we negotiate with physician practices and in some cases with their Hospital Partners. It's an attributed plan to primary care physicians. We do it now both on our HMO business and importantly on a PPO business even wear. Our members have not selected a primary care physician cuz we've demonstrated not to get to one. Can you guys said we haven't attribution model that is valid and we persuaded our physician Partners. It's valid even for our PPO members did shared-risk with big upside potential both for achieving quality goals, and we have a group of 40 or so. Aldi measures inpatient outpatient process outcomes patient experience increasing to look into patient-reported outcome measures. And as I said, it's been heavily studied.
00:13:52The last study which came out several years ago and found that we are kind of approaching that Holy Grail and health care of Better Care at lower cost or at least at a slower rate of growth in cost. We hope to see the next analysis of the first eight years of it published soon have a Health Plan cost which is basically medical loss ratio write the unit level. You measure to answer the patient satisfaction. I assume we're under an ATC Steve you said, you know, you measure cell phone growth and an alarm things like that. I'm not sure that's actually how we met her cell. So just you asked her earlier. What what is a Blue Cross plan has probably don't know fundamentally. What the Blue Cross Blue Shield Association is. Yeah. What is Blue Cross? What is Blue Shield? Right? What is the overall Federal?
00:14:52Did not work right to the history of that is that the Blue Cross plans traditionally provided Hospital Insurance in the Blue Shield plans were set up to provide insurance for a physician services in most of the states. They merged like in Massachusetts where there's one Blue Cross Blue Shield plan that covers the entire state. Do you operate independently like you're bored as an independent board to someone from the Blue Cross Blue Shield Association sit on your bored or if they do not and so we have an independent board and we are unique in this respect where charted actually is a public charity by Massachusetts law there a lot of other not-for-profit plans. I happen not to be public Charities that has a modest difference but it just back to it, you know your earlier question Steve which is so who's our shareholder. It's the community and you know to some extent our customers and our members and so when we measure success, we're not measuring a particular by shareholder return what horse is measured in pi affordability. Are we affordable for the community that's important thing, especially in a high-cost state like, Massachusetts.
00:15:52Are we delivering value to our members into our customers? Are we improving Community Health which matters a lot to us as a community not-for-profit resource. And so look at Medical loss ratio. It's interesting under the Affordable Care Act. As you know, it was a requirement that 85% of all Health Care spending be all premium dollars be spent on Medical Care will Massachusetts actually set that hire initially at 90 and then they lowered it to 88. If you go below that you actually have to rebates your customers and we've never rebated dollar to our customers which means that we keep our administrative spending modest and we try to return as much of the premium dollar back to the community in terms of care for a membership may not want to maybe you can officiate the rights to her but not for profit does not mean barely break even right, right and Blue Cross Blue Shield plans. I believe I'm I'm not a astute.
00:16:52Do you have their balance sheets, but they've been doing very very well and so Lake where do the not-for-profit prophets? Yes. Well, so just before I answer the question are absolutely right with your question and we describe ourselves as kind of a hybrid organization. So the one hand we have eight billion dollars worth of Revenue. We could be a Fortune 500 company in terms of size. We need to compete in a very highly competitive market with companies like United now CVS Aetna now ESI Cigna big companies with huge amounts of capital in a lot to invest and we also have young upstarts disruptive company is in our market and we have by the way of some very highly regarded not-for-profit plans like Harvard Pilgrim in tops. So it's highly competitive market. We have to operate very efficiently. We also interesting ly and we call this the end of one problem cuz we are like no other plan in the country and in our Market we pay taxes, so we're not for profit and we pay taxes what taxes do we pay? We pay federal taxes.
00:17:52We pay state taxes, you only text or exempt from our local property taxes, and we actually make payments in lieu of taxes and as a not-for-profit, we don't try to solicit contributions or raise money or do tax-exempt financing. And so we are this kind of odd hybrid organization. That way we have to run ourselves as a efficient Capital intensive complex business that competes with big publicly traded companies the other hand we have this community responsibility. We take very seriously. So back to that your margin question not to avoid it we tend to shoot for a very modest operating margin of between 0 and 1% and a total margin of between 1 and 3% That's if you look back over a decade, that's about what we do it's hard and sometimes we feel a little strange. We also have certain regulatory constraints on us on how much so-called risk-based Capital we're allowed to have and so we have to kind of live in this kind of narrow world.
00:18:52Of being a big company being highly competitive market needing to invest in our business, especially technology-intensive business at the same time. We had this response word of the community. What are the trends Racine without plans is vertical integration. I think in many ways started with United in that and with Optum intelligent. I started getting into the care delivery and Care Management and you've got anthem goes out and buys CareMore and fire. We just talked about signifies ever quora and yes, I Humana has done investment to joint ventures with her super Innovative players. So you've got this massive. Yo, my straw city of providers are all your neighbors hear you and you see yourself getting into Day Care delivery. Yes. It's it's a great question. And what I would say is I'm going to be a little evasive as yes or no, but I'll tell you exactly what I mean by that is right now because of the nature of the delivery system, Massachusetts
00:19:52Does you suggest is highly Consolidated especially around large academic medical centers in kind of hub-and-spoke bottles that are fairly their stable and in some cases growing and even further consolidation recently with Beth Israel Deaconess merge and Lahey and so it's unlikely that we would either tried to acquire or they would want a car's. However, we do believe we need to have very deep Partnerships with each of these large system, but 80% of our payments within a few years. We'll go to half a dozen or fewer systems and one movie made recently was the largest independent practice in Massachusetts was the Atria is Harvard Vanguard practice the Old Harvard Community Health Plan and they ended up signing a seven-year agreement with us to take are value-based model which we discussed earlier applied on a larger scale with them to a broader set of populations on a full Rich bassist mentioned a moment ago. You talked about landmark. Can you talk about some of these Innovative companies that you work with any one of the fun?
00:20:52Mental challenges for a lot of companies that Steve and I work with are we investing and is the process by which they get on your radar screen, they present their value proposition they get through your technology process that these are 12 18 24 month cell cycles and frankly the cell cycle is going off and kill really good ideas there capitalize to be able to get through that and they can survive. What advice would you give to the entrepreneurs out there who are shaping disruptive Innovative businesses that appeal to people are underwriting risk on population. I'd like how do they best approach a Blue Cross Blue Shield, Massachusetts what resonates what are some of the ways that they can effectively talk to you or your peers Blues industry. We are interested in kind of working with them on proof-of-concept. And so I think one thing is to get in early when they haven't fully designed weather this Air Technology solution or another song
00:21:52Ocean because we are not the most agile of companies. I'll just be for a cell's but I think it's probably true for the blue plans. We have a lot of Legacy technology systems we have to deal with and so it's not the kind of plug-and-play, you know, cloud-based data Lake easy organization that more contemporary conversations when have and so I think it's better if they come in early and so we can actually talk through the technology while they're developing that supposed to say, here's our Point solution. Let's just play the play with you because it's almost never liked him play with that. So that's one thing. I think I'm understanding where we're going is important, you know, you asked about net promoter score really early. So we really focus on that. So what would radically improve we we believe we have one of the best net promoter scores in the country. What is a blue plans? It's in the thirties and forties and we know that in and of course there different ways to measure net promoter score actual net promoter score on contact would be in the higher could be
00:22:52Seven or eight is military basic net promoter score of the Thursday and forties and lot of competitors are in the negative numbers are question is how do we get to 80b best-in-class not just in the insurance health and field that in the consumer overall and why we high today cuz we have superb member services in our call centers, you know, whether it measuring things like the first call resolution and Lead perform really? Well on that is directly connected to net promoter score. Our products are I think are easier to understand than some although the high-deductible products or a challenge and we see a differentiation on our net promoter score and our high-deductible plans vs. R9 high-deductible plans and and you know, that's kind of intuitive. But how do we change that? How do we educate our members early on in the process of the understand? How do we give them tools to actually use them easy to use digital tools, you know where they can shop for like commoditized services like Imaging
00:23:52Lab and stuff like that. So we're kind of working on all that but we have a ways to go and we fundamentally have to make it easier for people you have used to be like a few years ago. We did something another the EOB the famous. He'll be the explanation of benefits form. You know that most confusing document people get this is not a bill but it looks like a bell and so are responsible years ago was 04 years ago. So let's simplify this so it's easy to understand. It. Looks like your best utility bill looks like your Amex bill your Visa bill and we did that and I don't think our members cared or not, you know, so the question is, how do you eliminate this? How do you make it in a certain regulatory restraints on that? How do you make it online? How do you know give them access to it in a mobile way? And so we just have to change so I was just going to say I need health insurance has like a notoriously bad name, right? And so I'm curious as you sit here and here I was thinking a lot about this competition, I think about the start of health plans and they come at this with the much more.
00:24:52About it bright Oscar Clover, they come with much more consumer-centric view. I know you know one of the very well, but do you worry about those guys if they've got a lot to learn really hard to not to worry about them because we've seen almost every other industry be disrupted at some point. And so we have to assume that will happen to us. I go back through your assumption and challenge a little bet that you know, people don't like health insurance in some ways your health insurance a little like Congress who don't like Congress but they like their congressperson people love Blue Cross Blue Shield me when we do kind of reputational surveys a Blue Cross Blue Shield of Massachusetts. We are up there with the you know, Children's Hospital in Mass General on an MIT and Harvard University. How do you quit that do it 30 to 40 net promoter score? So I think it would people think of us days have great associations with the brand and they think of us has the highest quality, but when they actually measure the experience, there's still a lot of work we need to do cuz they're frustrated and they just think it's too
00:25:52Pensive I think it's partly service. It's partly affordability. Probably no surprises people hate surprises. And right now lasting in the boss example is your annual physical. There's no co-pay or deductible under the Affordable Care Act descended to do some Labs. You're still in your deductible. Suddenly. You got a $275 bill for a lab for a visit that you thought was free. That's going to make you unhappy now, so what can we do about that? So we could use Advanced analytics and other information we have to find out when people are going to their annual visit we could call them up physically call them up or contact them and some other way by text and say you have your annual visit if you get Labs we want, you know, when you're positively charged and by the way, if you actually use this Labyrinth that lab you might say 50% it we are apart of Life the runway on the size of the deductibles. We're probably be kind of running out there.
00:26:52So we have to do is especially those companies that have health savings accounts paired with the deductible. Make sure people understand them know how to use them. If you think health insurance companies cuz they're not very good team oriented missed the boat on this lady didn't quite realize that the doctor was going to come first. Our Healthcare was me the first experienced people had and didn't do the stuff that maybe some other customer service organization towards an industry. That's a fair criticism. And and I think that's partly that should have asked the question. How do you become a company that thinks about MPS and things about member of inventory friends all the time. Is it in Japan products? You going to start to anticipate these problems for our members in and being anticipatory is really bright as you said your MPS on your regular members were confusion or I wanted to shift a bit and we had Gary Gottlieb this the podcast in Massachusetts is a notorious state in healthcare for many reasons, right?
00:27:52Leader in many ways a indicator policy direction is also known as for being quite expensive it is and so we asked him who's at fault. And so I'll ask you the same question. Yeah, what I would say to see you by the way, that's good. Look the most strongest reason why we are more expensive is cuz we have a higher use of academic medical centers for routine care. There's just no question about that and that is at the heart of the answer on any kind of honest economic analysis will show that now it is true that if you actually look at our per capita spending that then you adjusted for personal income. We're actually in the middle of the pack and are premiums in middle of pack but your per capita basis. This is most expensive place to get Healthcare in the world. If you miss that. I think we've got a bleeder nationally as an exact.
00:28:51It also very involved in public policy. I want to do a little bit of traffic lights a little lightning rod to get your views on things. So let's start with Obamacare. What's the Lessons Learned? I think the lesson learned that when implemented properly we can significantly reduce the number of uninsured bring people into the insurance system and improve health actually and we have evidence of that in Massachusetts where we started at seven or eight years earlier. There's also a lesson that Healthcare remains a deeply partisan issue that is paralyzed Congress force people to go to litigation instead of kind of compromise and public policy and unlike Medicare Medicaid which were controversial when they pass and then people kind of accepted them. We're still fighting this way and you think 50 years from now Medicaid expansions allowed to run out. It'll have massive decrease in public health cause decrease in public health cost. That would only come if we really started shift dollars away from Healthcare towards Health and Social Services.
00:29:51That's a lesson of the Western European countries is there they spend less on Healthcare and more on social services and health. We're a long way away from that that would be as such a serious disruption to the delivery system, but I think we'll need it over time and how many cards are people trying to look at the social determinants of Health a second copy of my title has diabetes care just quickly we talked about how your leader have the moving that what are some of the lessons that you learn the hard Lessons Learned the failures that the federal government is it when a hard lesson is that you really have to move rapidly away from fee-for-service any have to you have to send a message with positions. They were not turning back because if they feel that Diva service is still viable. They're just going to take baby steps into value-based apologize eBay's to put out a lot of press releases, but they're not really doing it has gone and I think it will be history because now we have the State Medicaid Program the ongoing work at CMS around work and some of the other local private plans. I think it will be going over text.
00:30:51We may still have a fever service chassis underneath it cuz you need a way to kind of process claims and actually a tribute care and members and all that but I certainly hope so because it's such a deeply inflationary system that you have to kind of stopping drug pricing drug pricing. I think we'll just see around the margins the federal government over the next 18 months. I think presidential election will be important in this respect as well. The Congressional elections. I think we haven't yet reconciled our kind of desire for funding great medical Discovery with you having a regulatory arm again, every other Western European nation has sorted that out but it's a very different environment and the farmer Lobby is very very powerful. And finally, I guess the type of tissue are the Democrats these days is where do we end up on Medicare fraud first thing I would say is it's a good debate to have so unlike some of my peers who kind of want to just a pose it.
00:31:51Bring it on. Let's talk about it. But then let's really talk or whatever our goal. I think it may look more like the Germans switch on touch systems and it will the UK or Canadian systems. We already have half of all the payments and Healthcare come from state and federal governments. So I think we'll have I hope get everyone covered do it more affordably but doing the uniquely American way. I really enjoyed this conversation. Finally. Finally, they subscribe to iTunes and if you have any suggestions to Publix again, please treat us at a healthy dose Sports.

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