When Medicare Advantage risk deals soured, St. Louis-based BJC Health took its value-based ambitions directly to employers. Over the last three years of renewals, its direct-to-employer population has averaged a 0.5% cost trend for pharmacy and medical combined.
“Even with an academic medical center at our core, we’re able to deliver incredibly competitive total cost of care,” J.C. McWilliams, BJC’s chief managed care officer, said Nov. 3 during Becker’s CEO + CFO Roundtable.
BJC, which combined with Kansas City, Mo.-based Saint Luke’s Health System in January 2024, has 24 hospitals and about 48,000 employees. Its direct-to-employer offering is built exclusively for self-funded employers, so BJC does not need an insurance license or to hold reserves.
Mr. McWilliams said BJC wanted the program to go “beyond just network discounts.” The model includes:
- A dedicated third-party administrator that handles customer service and claims processing.
- A population health management platform that pulls in pharmacy and medical claims to risk-stratify members.
- Transparent pharmacy benefit managers with full rebate pass-through to the employer.
- Stop-loss carriers that understand the model and are “willing to sharpen the pencil” on premiums, Mr. McWilliams said.
The results have opened doors with the Gateway Business Health Coalition, whose members include Boeing and Ameren. Mr. McWilliams said early conversations with the coalition centered on hospital price caps, but over time they shifted to risk-adjusted total cost of care, driven in part by advanced primary care.
BJC is now working with the coalition on an advanced primary care model that includes primary care capitation, care coordination fees and a multidisciplinary care team.
Why BJC pulled back on MA risk
The employer push grew partly out of frustration with Medicare Advantage. BJC has participated in the Medicare Shared Savings Program since 2012 and was the first health system ACO in its market. Five or six years ago, it held numerous two-sided risk arrangements with MA plans that were generating surpluses, Mr. McWilliams said.
Within a couple of years, that flipped.
“You’ve got to have that good [payer] reporting that’s accurate, actionable,” he said. “That’s the linchpin of the entire arrangement, and that’s really fallen off in the last few years.”
Settlement statements, for example, failed to cap supplemental benefits expenses, Mr. McWilliams said. Without reliable data to manage the population, the surpluses became deficits, and BJC told plans it could no longer accept downside exposure. It moved those contracts to upside-only or pay-for-performance and expects to phase out MA downside risk entirely.
However, in the last year, BJC Health returned to a value-based arrangement it had abandoned after years of underperformance. He said the bar for returning requires a plan demonstrating its reporting, providing references from health systems where its arrangements work, and agreeing to the right deal terms, MLR targets and carve-outs.
In managed Medicaid, BJC is pushing back on standard total-cost-of-care models. Mr. McWilliams said one plan proposed a two-sided arrangement with a 90% medical loss ratio target for a population running at 99%.
“They basically just want you to write out checks for deficits,” he said. Instead, BJC is proposing arrangements focused only on the highest-risk, highest-cost chronic condition population, which limits its actuarial exposure.
Value-based care alongside fee-for-service
Mr. McWilliams and Leslie Dockan, senior vice president of care delivery and value-based strategies at Bloomington, Minn.-based HealthPartners, agreed that value-based care will not replace fee-for-service anytime soon.
BJC still pairs pay-for-performance with its value-based contracts, a combination Mr. McWilliams called “really beneficial.” For an academic system with higher unit prices, he said, the goal is to blunt those prices through efficient care management and faster diagnosis.
“An avoided MRI is [a] 100% discount on that MRI,” he said.
Ms. Dockan, who runs operations, put it more bluntly: “You can’t survive without fee-for-service.” HealthPartners serves about 1.4 million patients, more than 500,000 of them in value-based arrangements. She said the case to clinicians is that avoiding unnecessary ED visits, admissions and readmissions frees capacity for patients already waiting for care.
“Every time you talk about the utopia of value-based care only, it falls flat,” she said. “Your business model just wouldn’t survive that way today. So I think it always has to be a two-sided-coin conversation.”
Nolan Chang, MD, executive vice president for corporate development, strategy and finance at The Permanente Federation, said payers also want to see that their money is being used well as chronic disease populations and utilization grow.
“They want more information,” he said. “So we have to be able to tell those stories.”
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