For this column, I want to open a window into the thinking that occurred during the months preceding the hardest decision I've ever made: discontinuing CareConnect, Northwell Health's insurance company, which will close out its membership in October. While I have discussed CareConnect's closure in a previous column, my intention here is to give curious colleagues, aspiring executives and anyone else employed at hospitals and health systems a glimpse into the kind of thought process that shapes their workplaces.
The realization that we might have to close CareConnect came to me in 2016, roughly a year before we announced our intention to withdraw from the New York State insurance market on August 24, 2017. The mere thought of shutting down such a key component of our health system’s population health strategy was personally unsettling, to say the least. At first, I tried to push forward with our plan and not mention my doubts to others on my executive team. When we received our license to launch CareConnect in July 2013, we touted the importance of aligning our clinical performance and outcomes with financial incentives that historically have only benefited insurance companies.
Concerns began to emerge about a year after insurers began selling plans on the ACA exchanges, when Congress passed appropriations riders that effectively wiped out the federal government's obligation to issue $12.3 billion in so-called "risk-corridor" payments to insurers to offset losses during the early years of the exchanges.
Meanwhile, as CareConnect grew and enrollment increased, it became increasingly difficult to ignore the downstream effect of the ACA's risk-adjustment program. The policy was designed to prevent insurers from "cherry-picking" healthy customers by requiring carriers with healthier customers to transfer money to carriers whose customers are relatively unhealthy. As an unintended consequence, New York’s smaller, more-innovative insurers like CareConnect wound up subsidizing larger competitors.
Evaluating all options
I kept my concerns to myself for a few months to see if my team would raise these issues without my prompting. Eventually, they did begin to voice their concerns. Though I harbored my own doubts for months, I pushed back on them, holding out hope that federal agencies and Congressional leaders would take meaningful action to correct regulatory inequities and honor previous promises of additional funding. As the weeks and months dragged on with no solutions on the horizon, I encouraged members of my team to hone their arguments both for and against shutting down CareConnect so that we could weigh all sides.
When faced with such a high-profile decision, leaders must reflect not only on the business implications, but staff reactions and brand repercussions. In every organization, an intimate cadre of executives is involved with every important decision. During this process I relied heavily on my chief operating officer, chief financial officer, several strategy experts and our marketing and communications team. We also engaged in ongoing dialogue with our legal counsel to understand what regulatory hurdles we would need to overcome to actually shut down the program and what we needed to do if we wanted to reenter the market at a later date. Every team member brings a different perspective and area of expertise to the table, and leaders must curate a discussion that spans a wide breadth of knowledge and opinions.
I knew the closure of CareConnect would have widespread marketplace consequences. In the months prior to the ultimate announcement, I had discussions with the insurance division of the New York Department of Financial Services, members of Congress and officials from CMS. Many people lauded our efforts to expand into the payer space, but in the end, they acknowledged there was nothing they could do to significantly reduce the impact of the risk-adjustment payments. These discussions came during a monumental transitional period in Washington, DC. As President Obama left office, countless questions swirled around the agenda of President Donald Trump's incoming administration. No one knew how or whether the industry landscape would be changing.
Though it seemed unlikely that President Obama's administration would take action to ameliorate the problems caused by risk-adjustment payments, many members of our team brought up the possibility that President Trump's administration would enact policy changes to dismantle the payments. As 2016 gave way to 2017, we slowed growth of the program, enhanced processes to improve efficiency, improved implementation and did everything else we could to save money while holding out hope that new leadership at CMS would change the payment structure.
Finally, as new financial information came to light, we began to accept the cold, hard reality that CareConnect’s future was unsustainable. The financial realities were stark: CareConnect would have to pay $112 million into the ACA's small group risk-adjustment pool in 2017 – amounting to about 44 percent of CareConnect's 2016 revenue from its small-group health plan. CareConnect would be facing another risk-adjustment payment of more than $100 million in 2018 from its 2017 small-group revenue.
We could no longer wait for help to save CareConnect. Ironically, there has been some regulatory help since the decision to shut down CareConnect was made. While that is incredibly frustrating, I know that at the time the decision was made, we had no other option.
Fortunately, the size of our organization allowed us to absorb many CareConnect staff into different Northwell divisions, including our care management entity, Northwell Health Solutions, which has benefited from all the capabilities we developed by operating CareConnect. Northwell is fortunate to have the scale to retain so many of the talented individuals who took our offer to remain with health system. Knowing that relatively few of our employees would become unemployed as a result of the shut-down allowed me to remain clear-headed when deciding the best direction for CareConnect.
To other executives faced with similarly difficult decisions, I would say that performing exhaustive analyses and democratizing your decision-making process among key constituencies are two of the most important steps in this process. However, you must remember that during no-win situations like this, the right decision is simply to make a decision. While agonizing over difficult decisions is understandable, the organization is at greater risk from indecision than by the wrong decision. Shutting down CareConnect was the hardest decision I've ever made, but we learned important lessons along the way and fortified our population health capabilities to promote health and wellness, and ensure that patients, especially the chronically ill, get the right care at the right time.
As a result, if we ever decide to get back into the insurance business, we’ll be much better positioned for future success.
This op-ed appeared in Becker's Hospital Review.