Choppy waters confront new Blue Cross CEO

Star Tribune (Minneapolis, MN)

Sept. 29--There's no shortage of challenges for the new CEO at the state's largest nonprofit health insurer.

Eagan-based Blue Cross and Blue Shield of Minnesota has been one of the biggest Medicare health plans in the state for years, yet the market is confronting a major disruption as federal law prompts more than a quarter-million beneficiaries in Minnesota to shop for new coverage next year.

As the consolidation wave in health care continues, questions persist about whether Blue Cross of Minnesota will continue to go it alone.

And the insurer is facing expanded competition in its home state from two of the nation's largest health plans, including Minnetonka-based UnitedHealthcare.

"You have a 500-pound gorilla all of a sudden now wanting to live in your backyard," said David Martin, a consultant with Associated Benefits and Risk Consulting in Edina. "When you have that size of a competitor with that amount of analytics behind it, they could really raise some Cain."

Dr. Craig Samitt doesn't sound worried.

Samitt, who became the new Blue Cross chief executive this summer, says his company has new products that officials believe will entice Medicare beneficiaries as they have in the past. Among Medicare health plans, Blue Cross had a 45 percent share of Minnesota's market in 2017, according to the California-based Kaiser Family Foundation.

Samitt says the Eagan-based insurer and other carriers using the Blue Cross and Blue Shield brand have successfully competed against large national for-profits for many years. And the question about Blue Cross' independence going forward prompted Samitt to laugh during an interview last week.

Samitt most recently worked for Indianapolis-based Anthem, the health insurance giant that took over back-office functions for Blue Cross' business managing care for people in Minnesota's public health insurance programs. During his time at Anthem, Samitt commuted from his home in Golden Valley -- he bought a house in the Twin Cities because he likes the Upper Midwest and to be closer to family.

"The two things that I had heard about myself in the first week [at Blue Cross] was that I didn't really live here -- and I offered to take people immediately to my house, to show them it's truly furnished and I did buy it in 2015," Samitt said. "The second was that I came in to help navigate the sale of Blue Cross of Minnesota to Anthem," which he said was "the furthest thing from the truth."

"No new CEO takes a job to sell themselves to another company," he added.

About 2.9 million people have insurance benefits via Blue Cross of Minnesota, which employs about 3,800 people. It's been the largest of the state's nonprofit health insurers, which historically have had a large share of the market due in part to a state law that blocked for-profit HMOs.

In 2017, state lawmakers got rid of the ban on for-profit HMOs, which UnitedHealthcare cited as a factor -- but not the driving force -- in its decision to try becoming a bigger part of the Minnesota market in 2019. Before the law changed, Connecticut-based Aetna announced a for-profit joint venture with the Minneapolis-based Allina Health System to start selling coverage in Minnesota for 2019.

For-profit competition is one reason that Moody's Investors Service in August revised to negative its outlook on Blue Cross, although it affirmed the company's financial strength and debt rating. In competing with for-profits, Samitt believes that his organization's nonprofit mission and historical connection to the community will be assets.

"We have a fierce loyalty to Minnesotans and the communities we serve, which may be unlike some of the national insurers who are in part driven by profits," he said.

Of course, Samitt's former employer was one of those national insurers. Was Anthem less committed to its mission?

"I think there's always a mission orientation in for-profit companies, as well," Samitt said. "But I think for-profits are also beholden to other masters."

At UnitedHealthcare, company officials make no apologies for being a for-profit company, saying they are driven by their mission to deliver quality care and good service for enrollees at competitive prices.

"If a for-profit can deliver those three things as well, or maybe even much better, than a not-for-profit, then it should be available for the consumer to choose," said Philip Kaufman, the chief executive of UnitedHealthcare's business in Minnesota, during an interview.

Samitt went to medical school at Columbia University in New York City and completed his residency at a Boston hospital that's connected to Harvard University.

At the time, the Clinton administration had launched its attempt at national health care reform. Samitt said he was struck by the fact that while the public sector was dissecting all the problems in health care, "the industry itself didn't seem to be reflecting on what we needed to do to improve ourselves."

He attended the Wharton School at the University of Pennsylvania with the goal of learning what makes companies successful. By applying those lessons to health care, Samitt hoped to help whole populations of patients as opposed to helping one patient at a time as a treating physician.

"When I was in business school, I heard case studies about the best companies in the world, and not once did I hear a case study about a health care company," he said. "Incumbent health care organizations, not-for-profit or for-profit, tend not to be very innovative and tend not to implement industry best practices to transform themselves."

Samitt said he's worked at a series of health care groups that have tried to transform themselves by embracing the perspective of both health care providers and those who pay the bills, so the organizations focus on both better care and lower cost.

Two of those groups -- the clinic division at for-profit dialysis operator DaVita, and a large group practice in Massachusetts -- are in the process of being acquired by UnitedHealthcare's sister company Optum. The division has a growing business that provides care directly to patients in clinics, urgent cares and surgery centers.

The Optum acquisitions are part of a trend in health care where insurers and health care providers are getting closer together, on the theory that by sharing financial risk and rewards they'll more efficiently provide quality care. The moves make Blue Cross of Minnesota look somewhat different for not formally merging insurance, clinics and hospitals.

In the Twin Cities, not only is there the new Allina-Aetna joint venture, there's also Fairview Health System, which owns the carrier PreferredOne, plus Bloomington-based HealthPartners, which for decades has operated a large health insurance company plus a growing network of hospitals and clinics.

Again, Samitt doesn't sound worried about Blue Cross' position.

"Speaking as a leader who has led organizations that have been acquired by hospitals or health plans, that vertical integration does not necessarily drive improved outcomes and health," Samitt said.

"My commitment to this community is to forge new and different and lasting partnership relationships with providers that may very well be shoulder-to-shoulder partnerships -- not parent-to-subsidiary partnerships," he said. "Vertical integration doesn't [always] solve all of the problems."

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