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Analysis

Banner Health CFO Dennis Laraway on ACO Success, Expanding Strategic Footprint

By Jack O'Brien  
   February 07, 2019

The Phoenix-based system is only a few years into its operations as a payer-provider but the results have been laudable thus far.

Dennis Laraway is leading Banner Health's efforts to expand its footprint in academic medicine and value-based care.

He would seem to be the executive to do it, given his experience at major medical and healthcare systems. Laraway says he's been able to learn and benefit from those opportunities as he moved into his current role as CFO at Banner Health in Phoenix.

He previously served as CFO at both Memorial Hermann Health System in Houston, and Scott & White Healthcare in Temple, Texas, and was CFO at Catholic Healthcare West's St. Joseph's Hospital and Medical Center in Phoenix during the early 2000s.

In a conversation with HealthLeaders, Laraway delved into Banner's burgeoning organizational composition as a payer-provider, maximizing its market share, as well as the obstacles and availabilities that have arisen from the pursuit of value-based care.

The following transcript has been lightly edited.

HealthLeaders: Could walk me through Banner's move from Epic to Cerner, and what advice might you give CFOs who are considering this EMR transition?

Laraway: [The Cerner transition] was part of a new division and a new strategy for Banner Health in academic medicine. Banner acquired the University of Arizona Health Network back in 2015, which combines the Phoenix and Tucson operations to develop a Banner - University Medicine division that is now a $3 billion-a-year division inside of Banner Health.

The system conversion that went live in October 2017 was part of that strategy. We have Cerner's electronic medical record installed throughout Banner Health hospitals and operations. It was important for Banner to bring Tucson Medical Center and faculty physician operations inside that same clinical information systems footprint. As with any of these large system EMR conversions, they're challenging. You're disrupting a number of caregivers, physicians, and clinical operations with new IT systems and having to connect those systems throughout Banner Health into other applications, such as revenue cycle, billing, and financial applications.

It's an integrated, coordinated event that you have to plan for carefully. I think my experience in large integrated health systems prepared me well for these kinds of challenges.

We're now a little over a year since we made that conversion and it's taken us all of that year to remediate some of the challenges and changes in operations that ensued. We feel like we're finally reaching a point of stabilization. It does take that long with conversions of this scale and complexity.

HL: Discuss Banner's history with value-based care, its role as a pioneer ACO, and where the system sees itself positioned for the next two or three years?

Laraway: The journey is in front of us. While we've had some experience as an ACO, we're just nibbling at the fringes today in terms of value-based care and value-based payment models. We have been a sizable and successful ACO with the CMS demonstration programs. We're MSSP now, and we've done well. We have saved the program money, and in turn, Banner has benefited from shared savings and monies that we've been able to reinvest into our accountable care strategies and capabilities.

But to provide ongoing value-based care and a value proposition to our community, we think the journey is still in front of us, and this is why Banner is investing as more of an integrated delivery model from payer to provider.

We believe that we need to have the skills and capabilities that insurance companies do from the point of purchase of health coverage all the way through the points of rendering care, episodic care, or even more managed care. We believe you need to have all of those capabilities under one organizational structure. The integration of skill sets from payer to provider are key in managing value-based care and value-based payment models.

Today, we operate the market's third-largest Medicare Advantage program, and we have approximately 55,000 members. We are in a joint venture with Blue Cross of Arizona, and we sell that product under the Blue Advantage label.

Banner Health is delegated full risk premium to manage the medical services for that entire population. We're able to do that and continue to offer a highly competitive value-based offering to Medicare Advantage recipients in this market.

As a Medicaid contractor, we own and operate Banner - University Health Plans, and we were awarded a seven-year contract for the central and southern zones of Arizona, which will be for a complete care contract award that combines both physical and mental illness programs under the state Medicaid system.

Therein lies another example where we're able to take a premium behind the premium paid to us as a Medicaid contractor, manage the population of Medicaid recipients from Phoenix to Tucson, and we're able to do that underneath a network supported primarily, but not entirely, by Banner Health.

Both the Medicare Advantage strategy and the Medicaid contractor strategies are also supported by Banner Health Network, the same network and the same ACO that supports the CMS demonstration programs. We're able to carry the same competencies and network administration through to other lines of business and we can help share the value proposition across the communities we serve.

HL: Is there a move for Banner to expand its physical footprint, or is there a plan to move away from the brick-and-mortar model of delivering care?

Laraway: It's a little of both in the way we evaluate the marketplace gaps in our delivery system.

When we think of gaps in Banner Health's operating models, we think of gaps from both a payer and provider perspective. As an insurance division offering, if we have gaps in our network, gaps in Banner Health's footprint, gaps in physician network services or gaps in hospital services, we will evaluate whether we want to develop and fill those gaps rather than having to contract with others.

In a provider-sponsored health plan strategy like we have, we will evaluate continuously as to whether our footprint is adequate for the insurance offering and the members that we're serving.

The same holds true as a provider organization: If we have gaps in our operating model, we'll evaluate as to whether the marketplace demand would support Banner building and expanding its footprint.

We operate 27 hospitals in six states, so we're always looking at our communities and whether our network in footprint is adequately positioned. There will be opportunities for us and it might not be as inpatient-focused, it may not be as hospital-focused into the future, so we may continue to add more outpatient ambulatory services to our footprint, and you're seeing Banner Health do that today.

Through acquisitions, we've added a number of urgent care centers to our footprint and we're in the process of adding imaging centers and ambulatory surgery centers across our markets. [Regarding] the value-based care proposition, we're trying to add points of access at lower costs so that we can carry out our responsibility to bend the cost curve and put patients in the right setting for the right service. That's the value proposition coming alive: right service, right outcomes at a lower cost, and that's what we're trying to invest in.

HL: Looking ahead, what do you see as some of the biggest obstacles and opportunities for Banner?

Laraway: We're excited about some of our transformational investments—it's still relatively new to us—but with the Banner - University Medicine division and the partnership with the University of Arizona, it's an exciting time for all of us here.

What we're looking to accomplish between Phoenix and Tucson—where we have two medical schools and two academic medical center operations—we're creating a large academic medicine division that can grow clinical programs, recruit new physicians, [and] build on centers of excellence that can be regarded by our community, both locally [and] regionally, and perhaps nationally, as being clinical centers of excellence that would be destination level services.

We are trying to move from a volume fee-for-service based model of healthcare to value-based care and the investments we're making as both payer and provider as we transform the organization will help provide value to the communities we're serving. It will help us provide better coverage and a better experience inside of Banner Health at a lower cost. And we're wedded to that strategy.

I think on the challenge side, I think we look at the economy and the headwinds that we're continuously facing in this industry.

We're in a border state. We have a significant safety net responsibility here, including an undocumented population that is challenging for all of us as there's no source of revenue behind the undocumented population. We're all trying to support the safety net. Banner Health is a leader in the state of Arizona in supporting the safety net, [and] we take that mission with pride, but we also understand the challenges and headwinds to go along with that.

That's an ongoing challenge that will require constant policy assessments and looking to sources of revenue and funding to continue to support that mission.

Jack O'Brien is the finance editor at HealthLeaders. 


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