A Discussion with President & CEO at Blue Shield of California on COVID-19

April 2020

I'm Court Houseworth, Managing Director and Co-Head of Cain Brothers’ Managed Care Practice. Today I'm pleased to be joined by Paul Markovich, President and CEO of Blue Shield of California. Paul is a 20-year Blue Shield veteran and served as Board Chair of the Blue Cross Blue Shield Association in 2018 and 2019. Paul is leading Blue Shield's efforts to transform healthcare and drive innovation.

I'd like to get your perspectives on how California has responded to the COVID-19 outbreak thus far and how Californians are managing today.

California has been a leader in its response, and I give a lot of credit to Governor Gavin Newsom and his team for being the first state to announce a shelter in place effort. Of course, it's not just the governor and the state. The Bay Area was really one of the first geographic areas to execute a shelter in place order. Based on what we're seeing right now, that seems to be paying dividends in terms of reducing the spread of the virus. We still don't have all the necessary data to really understand the impact, but the data we have seen seems to be pointing towards a reduced level of increased cases relative to what it used to be, at least in Northern California.

We’re not out of the woods yet and no one's celebrating success by any means. The steps that we've taken and Californians’ adherence to that shelter in place order has been impressive. I think it's paying dividends. Beyond that, I’ve been incredibly impressed how much people are leaning in across the spectrum – in the public and private sector, hospitals, pharmacies, labs, medical suppliers -- and are just trying to do the right thing. It's bringing out a lot of good in people.

How have you prepared the company, your members and your providers to deal with the expected surge in California?

We're doing our best to do work through the anticipated surge in COVID-19 cases. However, we aren't exactly sure how to best help in all situations. We've spent a lot of time reaching out and asking questions, but trying not to overwhelm our constituents, especially our providers. However, we are trying to understand - Where are you? How are you doing? Do you have enough supplies? How is your staffing? What does your bed capacity look like? How can we help? These folks have a lot of work on their hands in terms of the preparation, but we're certainly reaching out and trying our best to help.

There are several policies we've already announced such as waiving any cost sharing for COVID-19 testing and associated costs for members. On the providers side we've had several conversations about how to ensure that providers have adequate supplies. In fact, we bought and distributed several million dollars of protective equipment when we found it available, to help with the crisis. We have done a lot of work with the state as well as with labs and medical suppliers trying to secure and distribute important supplies that would help advance testing. Simple things like getting swabs and contributing $500,000 to the Oakland fund, in large part to set up drive-by testing sites.

I won't give you the entire laundry list of what we've done, but we have tried to lean in and do the best we can. I think we're all dealing with an unprecedented situation and it wasn't as though we had a playbook walking into this. We're learning as we go.

What specific changes has Blue Shield made in the way it interacts with its members? For example, how have you addressed a large increase of call volume regarding benefits or other questions and concerns?

We've been hitting our customer service goals. On average, we’ve been answering the phone within 30 seconds and getting a pretty high level of satisfaction from the people who call in. We sent out communications almost a month ago and encouraged our members to obtain larger pharmacy supplies through their mail order benefit and that seemed to have helped quite a bit. We've also encouraged and seen extensive use of our telehealth services. That's really gone up substantially, so people could talk to a physician if they felt they had symptoms or needed to without creating more risk for themselves and for others by going outside the house. Those things have helped quite a bit.

We haven't hit the peak yet in California. We still aren't all the way into it. I'm sure things will get a little more stressed in the coming weeks. But for now, the steps that we've taken to try and anticipate people's needs, the need to shelter in place, the need to access medicine, they seem to have been working.

You were one of the early proponents of using telemedicine and virtual care. What” kinks” have you found in the delivery model?

It is most important to connect back to your primary care physician. Because we can create comprehensive real time digital records and provide that closed loop between “I had an appointment/ received advice from an online physician and now I would like my primary care physician to know that”. We need to ensure that information gets incorporated back into their traditional path of care. We really need to get the digital infrastructure nailed down and close that loop.

You can't get all of your care virtually. It's very difficult to have a hip replacement via telemedicine. At some point, you have to come back to the actual system, and you want that care to be as seamless as possible, with telemedicine records transferred. That's the biggest challenge we have had up until this point. We have a solution for it; it's just that we don't have all the providers participating and sharing their information in a way that would facilitate it working.

How do you think the accelerated adoption of telemedicine will change the way healthcare is delivered postpandemic?

I think this pandemic will accelerate the adoption of telemedicine. Because there was so much use of it, I think it's going to be much more commonplace. I think folks will be more comfortable with telemedicine and it will be accepted.

There's typically an adoption curve, and you have early adopters and then eventually others follow and it becomes the norm. And I think that's a good thing. Honestly, why wouldn't you want to, if you could, access important medical advice in a manner that doesn't require you to leave your home? I think especially for things like behavioral health issues, but also for infectious disease, it's very, very helpful to everybody for you to do it virtually. I think it will accelerate the adoption of this important new technology.

Speaking of mental health, how is Blue Shield providing additional support to members experiencing challenges with anxiety, depression, stress and substance abuse?

Telehealth can be helpful in providing much needed support. I hope that it's helping people in those circumstances. We are doing our best to encourage people. We're trying to communicate that as acute as this crisis is, as long as you're smart and following the guidance that you've been getting from the Centers for Disease Control and the State, then you're going to reduce your risk quite a bit. We will get through this. Trying to help people understand that it's an acute crisis, but it's not an existential crisis, helps. We all won't be sheltered in place forever. It's going to be something that lasts weeks, not months or years, and we'll get through it. We will figure out how to manage this virus because we manage with viruses every day and our immune systems and our medical systems are built to deal with this, even if we’re not completely prepared to do so right now. We are trying to give people options and alternatives if they're feeling a level of stress, and to the extent that we can be fact-based and calm and share a sense that there's a path forward. We’re trying to help people remain calm and avoid getting overamped in a situation like this.

Over the weekend, Covered California published a report that premiums in the individual and employers’ market could increase by 40% or more solely because of unexpected COVID-19 costs. How will we get to solutions to address these unplanned costs? And ultimately, are the federal and/or state governments going to have to be part of this solution set?

One of the things we found in these situations is that healthcare costs can only go up so much because the supply of healthcare, like hospital beds for example, is not that fungible. It's reasonably fixed.

No matter how sick the population gets, it's almost impossible for a health plan to have their inpatient bed days per thousand go up by twice the amount that they are today. You can't put enough hospital beds up quickly enough to do that.

You’re seeing that now. When the population all get sick at the same time, there's just not enough capacity in the system. It's unlikely that you could get to a jump that large and sustain it over time. The way to deal with it ideally is if the federal government would put in place broad thresholds at which they provide stop-loss coverage for health plans. That would be the ideal way to deal with this. So, going in as a health plan, you don't feel like you've got to price for the worst-case scenario.

You can price for a level that says, okay, it should be reasonable to expect this virus will not repeat in a way like it did this time. I can project my premiums and my costs based on something closer to a norm, but if I'm wrong by a large margin, I'll have a backstop. I'll still generate losses, but they won't be the kind of losses that creates an existential risk to the company or a financial risk that could topple the company. I think that's the kind of thing that can really help. The sort of thing that they did, or they tried to do, at least, at the beginning of the Affordable Care Act and then didn't fund later.

But that kind of stop-loss backstop for health plans could do a lot to stabilize premiums and, in all likelihood, we wouldn't tap into it because I honestly believe we will work our way through this crisis. We will figure out treatments, we'll figure out a vaccine, we will develop natural immunities over time that will really make any next future wave much more manageable and a little more like other viruses that we deal with over time like the flu.

At this stage in the crisis, can you share with us lessons learned and changes that you hope to see implemented to improve our overall responsiveness to the current healthcare crisis and future healthcare crises?

I'm certainly happy to share my perspectives. I am not a public health expert, but I have delved into a lot of those questions just to try and help. We just need to get better coordinated, plan ahead better and put better infrastructure in place at the federal, state and local levels to deal with a pandemic like this. For example, having an appropriate supply of protective equipment so that you're ready and you have a means of gathering data around the testing and where it's coming from. A coordinated approach at the federal, state and local levels to coordinate and deploy resources, as well as tracing individuals that have the disease to selectively isolate and quarantine those individuals is basic public health. The ability to track and understand that reporting from the local and state level to the federal level allowing us to understand what's happening on the ground and then respond to it quickly as a country, is really what has been lacking in this response.

When you're trying to play catch up, while a virus is just rampaging through the population, that's so highly infectious, you really can't keep up with it. You must plan these things out and have them set up well in advance. And the same way that you've had a fire drill when you were in school or at work and said, "We've all known what a fire drill is and when the fire alarm goes off, we know what you do." If there's a fire in the building, you don't want to be planning for how to line up and how to get down the stairs and not to use the elevators. You want to have a plan. It’s the same thing for pandemics. You really want to have planned and drilled and have everything in place before it starts and then just put it into motion.

Is your sense that the industry will start to think that way or will everybody just go back to the way it was and forget about March, April and May of 2020?

I certainly hope it's the former, not the latter. This has been intense enough and long enough that we will, if we can, make these changes and put them in place right away. Our memories won't fade that quickly. And I don't think it's the industry as much as it is the government, but there may be some changes required of private industry. For example, it's clear that a lot of the manufacturers of tests have put out their own proprietary machines that can be used to process the test by the labs, but they only allow their tests to be run through on their machines. You don't have a lot of interchangeable parts in the lab operations. I was talking to a South Korean firm that generated huge volumes of test kits, but we couldn't dramatically increase the use of test kits supply because there wasn't the equipment and reagents in place here for the labs to run and use their test kits.

There's going to have to be some changes, but my guess is they'll have to be prompted by government in the industry to get in place something where there's more interchangeable parts in the lab supply chain so that when we need to ramp up our testing, we can do it quickly.

Join President & CEO at Blue Shield of California and Court Houseworth, Managing Director at Cain Brothers, in a discussion of the COVID-19 pandemic, its impact on the healthcare sector and how Blue Shield of California is responding.

Paul MarkovichiPaul Markovich is President and Chief Executive Officer of Blue Shield of California, a nonprofit health plan with over $20 billion in annual revenue serving over 4 million members in the state’s commercial, individual and government markets. Markovich has launched and led numerous initiatives to drive innovation and help reimagine healthcare, including funding support for a statewide provider directory to make it easier for Californians to find physicians and facilities in their plan; supporting development of a statewide health information network for patients’ records, enabling more seamless and holistic care; and investing in a partnership with the California Medical Association to help physicians pilot new care delivery models and leverage technology.

In December 2019, Markovich became Chair of the Board of Altais, a subsidiary company created under his leadership to invest in physician practices and equip them with the tools and technology they need for a sustainably affordable, high quality health care system.

His mission driven executive approach is known for leading enterprise-wide efforts to transform health care, facilitating growth and managing operational risk.

A 24-year Blue Shield veteran, Markovich previously served as Chief Operating Officer (2009-2012), responsible for Health Care Services, Network Management, e-Business, Marketing, Product Development, and Customer Operations. He was Senior Vice President of the Large Group (2004-2008) and CalPERS business units (2002-2004). In the late 1990s, he led the company’s Product Development unit, introducing numerous products and services such as the first California Health Maintenance Organization to allow self-referrals to specialists and initiating online access to member benefits.

Markovich spent 2000-2002 as an entrepreneur co-founding a consumer-driven health plan, MyWayHealth. He then joined Definity Health, another consumer-driven plan based in Minneapolis, before returning to Blue Shield.

He recently served as the Board Chair of the Chicago-based Blue Cross Blue Shield Association, the national umbrella organization across the country. Together, these plans provide health coverage for more than 100 million Americans. In addition to chairing the Altais board, Markovich serves on the boards of Manifest MedEx, America’s Health Insurance Plans and the California Association of Health Plans.

Markovich is a North Dakota native and Rhodes Scholar with a Master’s in Philosophy, Politics and Economics from Oxford University. He is a graduate of Colorado College, where he earned a Bachelor of Arts in International Political Economy and played Division I hockey.

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