Exclusive interview: New CEO leads CareSource through big changes, growth

Sep. 29--The new CEO of CareSource has brought new talent and a casual flair to the corporate culture of the Dayton-based insurance company.

Erhardt Preitauer has been on the job since May 2018 as the second chief executive to lead CareSource, which grew over the last 30 years from a Dayton experiment in Medicaid management to a 2-million member insurer with a presence in five states.

Preitauer, who recently sat down with the Dayton Daily News, is now tasked with keeping the nonprofit focused during a time of significant growth and change.

CareSource is up to 3,000 employees in Dayton, making it one of the city's largest employers. It just built a second downtown office building. It manages half of the Ohio Medicaid plans and is growing into new areas like mental health and veterans care.

At the same time, the company has to once again win its bid to manage plans for the Ohio Department of Medicaid, which is the company's main business line. Pharmacy benefits have been overhauled following a year of controversy. And presidential candidates are moving universal health care from fringe idea to earnest proposal.

Preitauer said the company is well positioned to navigate whatever comes its way.

"There's no other platform in the country, I think, that is as solid and well positioned as CareSource," he said.

Jeff Hoagland, CEO of the Dayton Development Coalition, said he's impressed by the leadership team Preitauer has recruited from outside Ohio.

"He's bringing in top talent and they're not telecommuting. He wants them all to live in the Dayton region and they're moving into town and they are getting engaged in the community. To me, I think that's a great form of leadership he's showing," Hoagland said.

CareSource recently stopped requiring four year college degrees for a lot of their jobs, which Hoagland said is in line with some of the big names in tech dropping requirements for four-year degrees.

"So he was right there on the cusp -- maybe a little bit ahead -- of some of these cutting edge high tech companies. That just shows he's very forward thinking and just thinks a little bit differently and a lot of it is about how can they get the best employees," Hoagland said.

He's a fan of the Oregon District restaurants and bars, including Jay's Seafood, which he said has become one of CareSource's main places to take people they are recruiting.

He wore jeans with his suit jacket the day he sat down with the Dayton Daily News and said he tried to bring a casual style to their work place culture. At one employee event, he performed a skit for the employees wearing a moustache and sequinned jacket while playing the role of game show host.

Glassdoor did an anonymous survey of employees and announced in June that Preitauer ranked 20th on their national ranking of highest rated CEOs.

"She (Pam Morris) was the brains, the passion, and the drive to take CareSource from a small 20-some-person nonprofit to this impressive business organization that it is today," said Dayton City Manager Shelley Dickstein. "I think what I see with Erhardt is he has a great vision to take CareSource to the next level and has the passion and the energy and the drive to make that happen."

Dickstein said the company generates income taxes to support the city and its neighborhoods and since its headquarters is in Dayton, that means its c-suite talent is also living in the area and supporting the community by sitting on boards and other community activities.

Having a large company with its headquarters in Dayton also sends a positive message to other businesses, according to Dickstein.

"It brings a certain amount of consumer confidence," she said.

Career history

When Preitauer took the job, he left a position as CEO of Horizon NJ Health, the largest privately-managed Medicaid plan in New Jersey, which he said had a lot of similar cultural elements to CareSource.

Before that, he oversaw the middle third of the U.S. for Aetna and also held positions with WellCare and UnitedHealthcare.

He got some politics experience when he served as chairman of the board for Medicaid Health Plans of America, which lobbies on behalf of private Medicaid plans.

"So I've had that opportunity to see a very national view of how all this works and got the opportunity to work in a lot of different states and I think all that prepared me for for this experience," Preitauer said.

Largest Ohio Medicaid plan

One out of every six dollars in the state's biennial budget will flow through CareSource, making it the largest check the state writes each year.

CareSource manages over half of Ohio Medicaid plans, which is its main line of business.

The Medicaid program is jointly funded by the state and federal government to provide health insurance for people with low incomes. It covers about a fourth of Ohio's population, half of all births and most of the care for the state's elderly residents and people with disabilities.

In Ohio, most Medicaid dollars are not directly paid out to doctors, hospitals and other health care services. Instead, 90 percent of the nearly 3 million Ohioans on Medicaid are enrolled in private insurance plans. The state pays those insurance plans a flat rate per person per month and those plans manage and pay out that money to health care providers.

Last year, CareSource had $10.4 billion in revenue and said in its annual report that it spent 91 percent of that money back out on health care and kept about 9 percent for administration.

Besides Medicaid, CareSource also manages Medicare plans, sells individual plans on the Affordable Care Act marketplace and recently branched into managing veterans health benefits.

For 15 years, Preitauer said he's convinced himself that maybe the next year would be a calm and clear year for the health care industry. But he has yet to see that happen.

"All of that complexity only makes our steadfast focus on our mission even more important," Preitauer said. "I see organizations getting splintered all over the place if they don't know who they are and they don't know where they are going."

Contract up for bid

CareSource, which the state has paid a total $31 billion since fiscal year 2012, now has to once again win its contract with Ohio Medicaid.

That's because Gov. Mike DeWine's administration is rebidding all the contracts it has with private Medicaid plans. There's no set timeline for how the long the process will take but it could go one for more than a year.

Preitauer said he believes that CareSource is well positioned going into the rebidding process.

"We believe that at the end of this we will show the amazing work that we've done and we're doing," he said.

Preitauer said the company's size and scale makes the company distinct and is what let's the company do the programs they do, like its life coaching or foster care programs.

"We're not necessarily being compensated for all of this, but it's the right thing to do for our mission. We're able to do that because of our scale," he said. "As we go through this process, we think these types of programs will

Preitauer is also leading CareSource as it overhauls how it pays for prescription drugs, with the effort backdropped by continued controversy at the state and federal level over prescription drug spending.

The Ohio Pharmacists Association and several state lawmakers have been critical of the companies that CareSource and the other Medicaid plans pay to manage their pharmacy benefits, with critics saying the subcontractors keep too much of the millions of dollars they manage and pass on too little to pharmacists.

In April, under Preitauer's tenure, CareSource announced it was making sweeping changes and taking a more hands on approach to how it manages prescription benefits, which accounts for 25 percent of its spending. The move won praise from the Ohio Pharmacists Association, which said CareSource is moving toward paying to encourage good outcomes and not paying to incentivize volume.

"I think they are genuinely working to make a better pharmacy program. And what comes out of that sausage meat grinder? I have no idea. But they are saying and doing all the right things on the front end," said Antonio Ciaccia, who lobbies for Ohio Pharmacists Association.

Ohio Medicaid, at the direction of the legislature, is also in the process of working out the details for what will be the first ever work requirements for some members of the program.

"On some level, ultimately, it's our job to implement with the state and the administration sees fit. At the end of the day, as they develop different programs, we just really want to make sure that we're able to serve our members in the best way possible," Preitauer said.

At the federal level, it's hard to tell where health care policy is headed.

The Trump administration has made several attempts at overhauling or repealing and replacing the Affordable Care Act. When Medicaid was expanded in 2014 under ACA, it fueled dramatic growth at CareSource, which went from $3.7 billion in revenue in 2013 to $10.4 billion last year.

Some contenders for the Democrat presidential nomination have proposed dramatically reinventing health care, including systems where everyone went on a public health insurance program instead of employer-sponsored health plans.

"I get that there's a lot of conversations are going on. But my view -- and the guidance I've always given my folks -- is if we're thinking about the right things, and given the opportunity to share data and influence and educate, we will get to the right place," Preitauer said.

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