The success of the state's unique Coordinated Care Organizations will be key to his legacy, says Andrew McCulloch, who is retiring next month.
When Andrew McCulloch came to Kaiser Permanente Northwest, it was after working in healthcare administration for the bulk of his career under a traditional medical staff model.
McCulloch, president of the Kaiser Foundation Health Plan/Hospitals, Northwest Region, has run Kaiser Permanente Northwest for the past 10 years and is set to retire next month.
He says the success of the state's unique Coordinated Care Organizations, which promise guaranteed Medicaid reimbursement growth in return for risk transfer from the state to providers, will be key to his legacy.
The Kaiser model, under which insurance is integrated into the provider side of healthcare, was a revelation.
It allowed the health plan, the physicians and the hospitals to work together to improve care without the friction points that often arise when those parts are owned by separate entities.
But while McCulloch was not involved in the creation of Kaiser's unique business model, he was a founding board member of something possibly as innovative: Oregon's unique Medicaid shared risk model.
Operating under a section 1115 Medicaid waiver from the federal government granted in 2012, sixteen so-called coordinated care geographically-based organizations were formed as constructs under which unrelated healthcare organizations work together to managed a capitated group of Medicaid beneficiaries.
For Oregon's state government, the deal to create the CCOs was a bold gamble, an attempt to reduce the rate of increase in Medicaid spending by a full two percentage points.
It was also a gamble for the CCOs, which take on full risk for their entire covered population.
McCulloch says the challenge is that while expanding benefits to a larger population is desirable, the rate of growth in those expenditures was unsustainable even in the short run.
"Basically, the compound annual growth rate in healthcare expenditures could put [state] general fund revenues at risk," he says. "The solution was the CCOs, which would allow [Medicaid] expansion to occur simultaneously with a reduction in the compound annual growth rate of expenditures."
Many states are in the same predicament in that they have to reduce the underlying elements of growth in the state portion of Medicaid budgets, he adds.
Interestingly, Republicans seem to want to make Medicaid for the rest of the states more like Oregon's model, in that they would receive block grants to manage their Medicaid population. In Oregon, the state passed the job of responsibly managing that money directly to the CCOs.
"That was the state partnering with providers to say we can give you assurances on future revenue growth, if you in return will take on the risks associated with keeping those cost caps in place. Kind of a value-based risk transfer model for this population."
As a founding member of HealthShare, Oregon's largest CCO with more than 240,000 members, McCulloch was instrumental in developing how the CCOs would contract with healthcare organizations, whether they be his own or others involved in the program.
HealthShare is one of 16 separate CCOs which require the coming together of hospitals, doctors, practices, insurers, and local counties in a coordinated fashion. Members can choose from four health plans: Kaiser Permanente, Providence, CareOregon or Tuality Healthcare, and 11 healthcare organizations that deliver care.
CCOs are oriented not toward a particularly delivery system, but toward a geographic area. Three quarters of the state's Medicaid population is located in the far northwest corner, where Portland is.
In HealthShare, says McCulloch, nearly all providers participate: Kaiser, Providence Health & Services, CareOregon, a Medicaid health plan, Oregon Health & Sciences University, and a number of other agencies, physician organizations and emergency care providers.
In other areas, "we all compete against each other," he says.
"For instance, Kaiser and Providence both have health plans, and both go after same commercial accounts. "But when it comes to Medicaid… if we couldn't coordinate our resources to take care of these individuals we would accelerate a cost shift already taking place, increasing inflationary pressures in the commercial market."
So while they compete commercially, they must collaborate in Medicaid, McCulloch says, for instance, on community needs assessments and addressing social determinants of health. No one organization can address these issues by itself.
Other areas of collaboration include better coordination of care by tracking people who are frequent ED users, for example, to steer them toward nonemergency services that could better serve them, he says.
The CCOs in general have been a huge success by any measure, with surpluses of around $900 million over their first three years of operations, although there have been controversies.
The individual health insurance market in Oregon has cratered, and the former governor who helped create CCOs has criticized them for failing to invest sufficiently in community health.
But as chair of the finance committee for HealthShare, McCulloch says with a per member, per month reimbursement model, risk adjustment is key.
"We learned about risk adjustment," he says.
"The assignment to a risk accepting entity was based upon whether or not you had capacity. If you did, you got the next person, so there's a randomness. As an entity, you had to get a risk score on these folks, an adjuster that went up or down based on severity and we didn't have good mechanisms to get risk scores and could see revenue fluctuate significantly."
After the first year, HealthShare installed "corridors" on risk assessment to provide stability inside the system so providers were not getting financially whipsawed by drastic changes in reimbursement.
"You have to be able to have some consistency in my reimbursement level," he says.
The other thing they learned with a Medicaid population is that exposure in terms of financials is not equally expressed over every person. Eight to 10% were high utilizers, and were appearing in different parts of the system.
To help solve that problem operationally, the CCO implemented what McCulloch calls an ED ID system, so if someone comes into Adventist and is a Kaiser patient, for example, that person will be repatriated financially.
To fix it operationally, however, requires a comprehensive EMR that transcends the outpatient and inpatient, he says.
With the success of Oregon's iteration of Medicaid using CCOs, McCulloch says healthcare organizations in other states should be prepared for some similar version of risk transfer, and that they can't be successful at handling that risk without such a comprehensive EMR.
"The ability to harness clinical info in real time to manage risk cannot be overstated," he says.
As for McCulloch, HealthShare is only one accomplishment he'll be proud of when he retires.
"Last year, we reduced the cost of our Medicaid population at Kaiser by 10%, and we did that by focusing on high utilizers--not by using claims data, but our own clinical information system."
Philip Betbeze is the senior leadership editor at HealthLeaders.