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and more than 100 speakers to Chicago April.
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industry's top leaders and former president George W.
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visit beckershospitalreview.com
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here in Chicago.
Hello, everyone. This is Jacob Emerson with the
Becker's Payer Issues podcast.
Thrilled today to be joined by a special
guest. Paul Markovich serves as the president and
CEO of Ascendiant. Ascendiant is the parent company
of Blue Shield of California, the clinical services
firm Altais, and the health services business Stellaris.
Paul, thank you very much for taking the
time to be with me on the podcast
today.
It's my pleasure, Jacob. Thanks for having me.
Likewise. And, Paul, before we dive into everything
we wanna talk with you about, can you
tell us a little bit more about your
career over these last couple of decades at
Ascendiant and at Blue Shield of California?
And for our audience who might not be
familiar, what is Ascendiant? And, ultimately, what are
you trying to accomplish with this new parent
company?
Well, let's maybe start with that, and then
I'll work my way backwards. It's,
just over a year ago,
we decided to take Blue Shield of California
and,
create a new corporate structure for it, which
was to have a nonprofit parent called Ascendiant.
And that allowed us to actually create the
two other companies that you mentioned in the
introduction,
both Stellaris and Altais, which are are not
health plan companies, and I think are more,
likely to be able to attract capital and
achieve a level of scale,
in this new structure than they would have
under the traditional one with Blue Shield of
California. So
we're hoping this structure will help help us
accelerate our attempts to create a health care
system as we describe it that's worthy of
our family and friends and sustainably affordable.
And I'd say in terms of my career,
that's what's really driven all of my decisions.
I got started in in New York, working
for Booz Allen and Hamilton. I started out
in financial services, but then got recruited over
to the healthcare side and and really felt
like,
the possibility of taking a system that was
clearly not functioning at its apex for everybody
great cause. And so I just started to
focus my energy on that. And so when
I moved out to the Bay Area,
the first job I found in 1995 was
with Blue Shield of California. And
and,
I did have about a two and a
two and a half year, what I call
entrepreneurial
sabbatical,
in the early two thousands, but came back,
to Blue Shield in 2002
and and just haven't looked back.
Wonderful. It must be a great place to
work to keep you there for that long.
So appreciate, that overview of of, what you've
been up to over that amount of time.
Paul, I wanted to get started today by
talking about,
what certainly was one of the bigger stories
to start the year within the health care
industry,
when you were,
one of five
total health insurance CEOs,
who testified
before congress,
over
the broad topic of rising health care costs,
rising health insurance costs.
Obviously, as you know, there's a lot that
was touched on during those hearings, nine hours
or more so, more than nine hours in
total.
I we heard about industry consolidation.
We heard about prior authorization,
executive pay.
I I guess, first, Paul, how was that?
I mean, what was it like to be
summoned to Washington and have to testify in
in front of lawmakers for so long about,
a myriad of of complicated topics?
Well, prior to the this all happening, I
had one colleague tell me he thought I
was the only one who was actually looking
forward to being there. And
I can't speak for anyone else, but that
was certainly true for me. And
and, Jacob, the reason is that
we're passionate about trying to transform the health
care system. We think it's
dysfunctional and broken and bankrupting us, and we
we need structural systemic change. And frankly, we
need help from the government. That's one of
the things I said in my testimony was
that,
I didn't see the health care system
willing to fix itself, and so it needed
some it needs some tough love and direction.
And I think the federal government is in
the best position to provide that. So,
I I saw it as an opportunity. Certainly,
there were tough questions, but there should be.
We're we should all be accountable to the
American people for the the product we deliver,
and it costs too much right now. So
I think those questions should come with the
territory and I felt comfortable
responding to them as best I could on
behalf of our organization. But I think the
opportunity
was to talk about
not just what's wrong with the system, but
what needs to change, the bold reforms that
need to happen. And I I really appreciated
the opportunity to do that, and my sense
was that those messages resonated.
Absolutely. And that really was what came across
at least on our end watching these hearings,
and and watching you testify was,
the candidness of your message, I think, compared
to some of the others because
you you flat out called the the health
care industry broken.
You called for collective accountability,
among some of these companies that, of course,
oversee the management of a lot of tax
payer dollars.
So can you can you expand on that
for our audience in terms of what were
you trying to communicate to lawmakers,
to the broader public?
And
have any conversations been sparked since either,
at your company alone or with colleagues across
the industry?
Well, I just believe fundamentally that you can't
fix a problem unless you see it and
identify it clearly.
And
and and glossing over it doesn't help. Avoiding
it doesn't help. If you just look at
the fact that our system costs too much,
the costs are growing at a rate faster
than everything else.
Our quality scores lag other countries. We're not
covering everybody, and most Americans don't have confidence
in the system. I don't see how you
can look at that and say there isn't
a fundamental problem. And also that it's systemic
in nature.
A fundamental problem.
And also that it's systemic in nature,
that there's just
the way that the system works, how we
pay all the players to do more rather
than to to get better outcomes,
The fact that we're not digital, we keep
using fax machines.
The fact that everybody who distributes drugs gets
paid more when we and when they sell
and administer a higher volume of more expensive
drugs, those are systemic issues that require
systemic fixes. And so I think
if if you're really gonna try to get
to the change, you gotta be straightforward, clear,
and candid about what the problems are, take
accountability
for
your what we own,
and then to,
to offer the opportunity or offer to cooperate
and collaborate to to fix it. So I
called for eliminating kickbacks in the pharmacy distribution
system and then finally putting the health care
system on a budget. And so, again, I
think those messages were clear and resonated as
potential constructive solutions. And, frankly, I was incredibly
happy to see that shortly after that, congress
actually passed a law
that changed,
how pharmacy benefit managers can price. And that
was,
directly related to one of the things I
was advocating for.
Yeah. I'm absolutely. I mean, to to what
you just said, we've we're already seeing major
updates in the PBM space and and some
of these,
this latest settlement deal with Express Scripts and
the FTC.
But I I do wanna ask you just
because you've been in this industry for for
so long, you are a very, respectable name.
Leaders across this industry,
recognize you and and know what you've done
over these over these decades.
And and and I think given
just the the sheer amount of news that
has happened in this last year from from
HR one last summer
to the expiration of the enhanced subsidies,
at the start of this year,
what led up to these hearings? How should
we be framing
the pressure
and and why lawmakers wanted an individual like
yourself to come to Washington to talk about
this kind of thing? How should the leaders
listening into this recording today, how should we
be framing this current moment in health care
from your perspective?
Well,
we have a fundamental problem
right now in that the average American cannot
afford the average health care premium without a
subsidy.
That subsidy comes from government or employers generally,
and neither of them can continue
to subsidize
at the level,
at that they do today, let alone where
it's moving in the future. And so
one of the things I tell industry leaders
all the time is you cannot have a
sustainable business
in an industry that is not sustainable.
And this industry is just not sustainable.
And I think what we're seeing with h
r one and Medicaid with without extending the
tax credits, with the the recent
call, or the recent,
announcement on on Medicare Advantage and the the
pricing that's gonna be available,
the reimbursement that's gonna be available on Medicare.
I mean, the government's starting to say we
cannot afford this,
and we're gonna have to figure out a
way to to make ourselves afford it, which
means that we as an industry have to
stop showing up and asking for more money.
We need to figure out that we have
a we have a cost problem, not a
revenue problem, and figure out how to tackle
it. So, you know, my message for the
industry is
this is our new normal.
We have to, as many other industries have,
figure out how to make
make an impact
and do better
with
fewer resources and just figure out how to
be more productive. And that has not been
the mindset of the industry for most of
my career.
No. Certainly. And I I think it it
really goes to a point you were making
in your your testimony,
talking about sustainability overall,
really for for Blue Shield.
And you were talking about capping
how the company caps its income at at
2% of revenue.
Your your five year net margin is just
point 23%.
And, you know, that really goes against, I
think, what is a very pervasive narrative about
a lot of health insurers, especially those that
operate, on the nonprofit side, those within the
Blues ecosystem.
So
overall, Paul, how are you thinking about balancing
financial sustainability at Ascendiant
with with your overall mission of trying to
keep coverage affordable,
trying to tamp down on some of these
rising costs?
Well, we we certainly have to figure out
how to bring in more revenue than our
costs,
in order to be able to provide a
product. And so that's fundamental. And we for
our purposes, we've figured that 2% margin is
the right number, and we have been falling
short of that over the last several years.
So that's certainly fundamental and important, but we
have to do that in a way
where the ultimate price that we're charging is
affordable
to the end customer, which which means we
have to get the cost, cost everywhere,
our own administrative costs,
which have been coming down, but also the
cost that we incur on the system. And
that's where I think health plans have the
biggest responsibility
and haven't
delivered on that responsibility
the way that they should have, and that
is
the the way we set up the rules
of the system for things like prior authorization
put a lot of burden and administrative
tasks and frustration
on
clinicians and health care providers and on the
and on the patient in the end.
I mean, it really is mind boggling to
me that the the most common communication mechanism
still today
for doing things like getting information for prior
authorization is a fax machine.
And, you know, the idea that that would
be
a customer and physician friendly mechanism
to be communicating back and forth and and
and making decisions that have huge impact on
people's lives.
I mean, really, shame on us as health
plans for not having figured out
yet how to solve for that. The good
news is we are now stepping forward and
solving for it. But I think there's a
whole series of things like that Jacob where,
we need to as health plans, but not
just as health plans as an entire industry,
figure out how to
make ourselves more productive. Like, we've had over
the last five decades, maybe a 150 to
200% increase in the number of physicians and
a more than 3000%
increase in the number of,
administrative jobs in health care. And so there's
a there's an opportunity here and an absolute
need for us
to drive those costs out of the system,
not just for the health plan, but through
the entire health care system. And since the
the health plans like ours
control the rules of the system,
we have the best chance to try and
change things in a way
that allows us all to be financially viable,
but in a way that's affordable to the
customer.
It's so funny. You really do hate the
fax machine, because I remember you you you
talked with us about this a few years
ago.
But I also think that points to the
fact that this is this is a topic
that just continues to stick around or or
a concept that continues to stick around that
so much of the health care system
is using a technology that I believe started
in the eighteen hundreds, the the core of
it.
And it's something we hear about from executives
constantly. They everyone hates the fax machine. So
I guess, Paul, educate me, educate our audience.
Are we getting close to a time where
that actually goes away? I mean, what's what's
the barrier here to getting rid of,
this this antiquated tech? Well, first first thing
you should know, if you really wanna see
how much I hate a, a fax machine,
there's actually a YouTube video of me smashing
one to smithereens, and the interesting story there
I'll have to watch that. Yeah. Well, the
interesting story there story there is that we
actually went to use one of the fax
machines that we had in the office, but
the team wouldn't let me because they were
using it. So we actually had to buy
a fax machine,
to to bash it up. But, you know,
the fact is what we need to do
what the fundamental driver here is we need
every American
to have
access to a real time comprehensive digital health
record
that they can access and use, that their
treating clinicians can access and use, and that
health plans can for administrative purposes such
as putting together quality scores and and submitting
risk adjustment. As soon as you do that,
then you bring health care into the digital
world.
And and and you can be exchanging information
in real time, and you don't have to
have these antiquated
mechanisms
to to send information back and forth that's
just highly unreliable
and slow and inefficient and
just puts a whole bunch of friction into
the system. So there's just no reason,
frankly, for these things not to be fully
automated and in real time. The technology has
been there not just for years, but for
decades. But the foundation of it is
we have to be able to know all
the digital information that's
related to that particular patient in those circumstances
so that all of the information that needs
to be used
to
prior authorize, settle a claim,
do risk scores, do quality scores, and figure
out payments,
all of that could be done in a
real time and automated basis. But foundationally,
the technology is there. But if you don't
have the information available in a usable format
in a timely way,
then you end up having to find alternatives
for sending that information back and forth, which
is where we are today. Absolutely. And I
know there's,
prior authorization
policies that are underway starting this year, going
into next year that, look to hopefully alleviate
some of that. So I I suppose we'll
see how this shakes out in the in
the next few years. But but speaking of
antiquated
models overall, Paul, I thought something that really
has stood out to me over these last
few years in terms of hard news announcements
was when Blue Shield of California
announced your unbundled
PBM model. And I know that went into
that started to roll out last year, so
we're just over a year now into that.
And you launched this with with Amazon Pharmacy,
with Prime Therapeutics,
some other big players,
and really trying to replace that traditional single
PBM approach and and take more control of
your your drug spending.
So so like I said, now that that's
been up and running for over a year
now, can you update us on on how
that's going? What's been working?
Anything harder than than expected?
Well, I'd say the there's sort of three
three parts to this, and one has gone
really well, and the other two have been
more of a struggle. The first part was
just being able to
put together all these different players
and and be able to administer the benefit.
I mean, we literally had a 143,
I think, data integration points that we had
to put together
to
piece together the ability to administer this program.
And
we managed to do that,
and and our members are getting their prescriptions
and getting really good service, and,
and we've saved some money from that and
the about the money that we expected to
in that first phase.
The other two things we needed to do
was first
we're first to
contract directly with pharmacy manufacturers and try to
get into a net price scenario rather than
all these rebates and fees and and back
and forth.
The good news there is the deals that
we have done have demonstrated there's, I think,
savings to be had and and a lot
simple a a lot simpler and clearer model
to the to the patient.
But we only have about 10 of them,
and we need thousands.
And so that has been slow going. And
then the other is to
really phase out and eliminate
the spread pricing that happens, not just with
pharmacy benefit managers, but with others like physicians
and hospitals.
And that has also been slow going. It's
been one negotiation at a time. So
we,
what we'd like to see accelerated, and we
are looking for ways to do this, or
how do we how do we get
to truly eliminating spread price pricing across the
board
and getting to direct net price,
for paying for for drugs,
so that we don't have all of these
rebates and fees,
sloshing through the system and potentially costing patients
more than they need for their for their
drugs.
Understood. Understood. And I like I said, any
any updates that you can consistently share with
us there, Paul,
we'd love to hear them because I know
our audience of health care executives has been
very interested in in how your company has,
really pioneered
this unbundling PBM,
a model.
But I also wanted to ask you about
some other recent news from the company late
last year as well.
You had
the Blue Cross affiliates in Hawaii and then
in Kansas join Blue Shield California as cofounders
of Stellaris.
Can you give us an update on where
that all stands, and and what's the vision
for this this company overall? Do you hope
to have more
Blue Cross plans join you in this?
Yes. Well, the the new structure that we
created with Ascendiant as a nonprofit parent,
and then creating Stellaris where we we moved
the technology
and other strategic capabilities
into Stellaris
so that
they could be available and sold to other
blue plans.
And the idea there was by having plans
like Hawaii and Kansas that
that joined as both investors and customers in
September
is that,
we can
jointly invest in these things,
and all get access to
more cutting edge and modern
capabilities
that help us serve our missions,
but at a lower cost
and not requiring
us to merge and change any of our
governance,
and independence
that each of the plans has. And so
that was, I think, the appeal of the
model to those two plans. I believe it's
a model that will appeal to other plans
as well.
And what it's going to allow us to
do is is to for example, once we
do have a digital health record, is to
to use the technology so that we don't
have to use fax machines, and we can
fully automate things and get a lot of
cost out of the system and move to
new payment models and effectively,
have a health plan that is capable of
doing the things that I said need to
happen across the industry
nationally in my, testimony to congress. So
that's that's what
Stellaris
is doing, and that's why
both Hawaii and Kansas joined. And that's why
I certainly hope that there will be others
that do the same.
Certainly. So you're trying to preserve the independence
of of these blues companies,
their their own corporate structures, but
lend them resources,
help them scale,
with these new technologies,
to
remain competitive, I imagine, among some of the
more, the national for profit rivals. Is that
correct? Precisely.
These, a lot of these capabilities are not
inexpensive to develop. And so the ability to
to get highly competitive,
scale sensitive
capabilities
to your members and be able to do
that in a trusted environment with another nonprofit
blue plan is is what we're offering.
Sure. Sure. It makes a lot of sense.
I you mentioned the digital health record,
the universal health record, which is something that
you laid out as a as a top
priority in your in your testimony last month.
You also mentioned moving away from fee for
service,
eliminating
PBM rebates and spread pricing,
and then putting the health care system on
a budget to create more affordability,
more predictability, and then, of course, like what
we discussed earlier, more sustainability for the entire
system.
Obviously, some of those are are massive goals.
Paul,
because we saw one of these, directly addressed
just in these last these last week, do
you have any thoughts on this this landmark
PBM bill that has now passed congress and
and, ultimately,
what it will mean and how it will
trickle down the effects of it for for
your members and for patients
everywhere?
Well, I I I'm really encouraged by the
bill and also by the settlement
between the Federal Trade Commission and Cigna Express
Scripts,
which had some of the some similar,
changes that are required
in terms of pricing and the distribution of
pharmaceutical drugs. I think what you're seeing, frankly,
is the death knell of a business model
where
the pharmacy benefit managers and their affiliates
tie their compensation to the price of a
drug.
I think what you're going to see is
that whole system is is effectively going away
now or is going to go away,
and
everyone's gonna have to figure out how to
get reimbursed in a very different way. And
so
that, I think, is highly encouraging and is
what
prompted us to move to the new model
and to advocate for these changes is that
it's there's no way
to get to a health care system that's
worthy of our family and friends and sustainably
affordable
if,
if a whole series of companies see selling
and administering drugs as a profit center and
effectively are collecting kickbacks to
sell and administer those drugs. I mean, that's
just it's not what's best for the patient,
and there's no way you get to an
affordable system. So I'm very encouraged by the
law.
There's been some other changes going on,
as well, and I think all of it
just adds up to
we're gonna have to move to a different
system.
Well, Paul, before we run out of time
here, I know we've touched on a lot
today, a lot of big topics.
Anything else we're missing? Anything else you wanna
share with our audience
or any other,
bits of advice you wanna offer,
all the other health plan leaders listening in
from across the industry?
Well, I I we didn't talk much about
the idea of putting the system on a
budget, and I think it's worth saying that
I've always believed that necessity is the mother
of invention. And so the idea of saying,
yes. There's a way to improve the health
of Americans
and do it
with health care cost trends that are at
or below price and wage inflation.
I'm absolutely convinced that is
possible.
We're not on a trajectory to do that
right now, and right now the mindset is
what needs to shift. I think the mindset
of most leaders in health care is to
just explain to everybody
why health care costs more than everything else
and why it trends at a higher late
at a higher rate than everything else.
And we as an industry have
to realize
explanations
aren't
gonna cut it, not for the American people,
not for Congress.
And,
and we have to get into a mindset,
a different mindset.
How do we make health care affordable? We
all have to be financially viable, but how
do we make health care affordable
and worthy of our family and friends? And
that means we have a cost problem that
we need to address.
And I'm hopeful that creating that kind of
budgetary top down pressure
is something that helps
create that mindset
and gets us into a much more innovative
phase in health care
and,
one where we we really are focused on
how to make things better for the patient
and more efficiently.
Well, it it's very clear to us here
at Becker's that Ascendiant and and Blue Shield
are at the forefront of of putting forth
things
into fruition that, that will tackle some of
those goals. So, Paul, I wanna thank you
for for taking the time to chat with
us,
and and for sharing your insights about all
these topics with our audience. We really appreciate
it. You're most welcome, Jacob. Thanks for the
time. And to our audience, if you'd like
to listen to more podcasts from Becker's Healthcare,
you can visit beckershospitalreview.com.