RALEIGH, N.C. - Two top Obamacare officials spent years in their Washington offices, right next door for a time, thinking about how to fix health care.

Then both came to North Carolina, determined to put their ideas to the test in the real world. One runs the state Health and Human Services Department, including Medicaid. The other led the state’s dominant private insurer. Combined, they cover well over 6 million people, more than half the state.

Together, they made North Carolina arguably the most innovative state in the country when it comes to improving how health care is delivered and addressing the underlying social and economic drivers, like homelessness, of poor health and high costs.

North Carolina is not the most obvious place for an outsized health care experiment. Once the face of the “New South,” the state swung hard right, and then swung again to a contentious middle. It’s among the dwindling number of states, mostly in the South, still holding out on Obamacare’s Medicaid expansion. Democratic Gov. Roy Cooper intensely wants to change that and cover another 600,000 low-income people. The Republican state Legislature, just as intensely, does not.

Mandy Cohen, North Carolina’s secretary of health and human services, is working to transform the state’s health care system to promote value – better care at lower cost. | Cliff Owen/AP Photo

In the middle is Mandy Cohen, Cooper’s secretary of health and human services. A physician and policymaker, Cohen held several high-level health jobs in the Obama administration and helped implement the Affordable Care Act. An outsider – she had not lived nor worked in North Carolina before – she came on board prepared to carry out the Republican mandate, enacted under Cooper’s predecessor, to switch the state’s Medicaid system to managed care. But she also undertook broad efforts to tackle homelessness, hunger, lack of transportation, domestic violence and other socioeconomic drivers of poor health —sometimes by smartly leveraging a Medicaid dollar, sometimes by partnering with another state agency or community-based organization.

Cohen has framed her “Healthy Opportunities” initiative pragmatically, emphasizing sustainability and return on investment in ways that won over Republicans – both in Washington, where the Trump administration approved the state’s $650 million five-year pilot; and in North Carolina, where even dogged foes of Medicaid expansion like state Senate Majority Leader Phil Berger bought in.

“We’ve had a great working relationship with Secretary Cohen,” Berger said, adding he wants to pursue changes to traditional Medicaid on a bipartisan basis, even while the fight about expansion persists.

The bipartisan buy-in to Cohen’s approach to Medicaid – both from local Republicans like Berger and the Trump administration, which has been focused on conservative priorities like rolling back Obamacare and adding work requirements to Medicaid – illustrates that the focus on social drivers isn’t a progressive blip. It’s an increasingly ingrained part of how policymakers and practitioners are thinking more broadly about the definition of health and how to attain it.

Patrick Conway, former CEO of Blue Cross Blue Shield of North Carolina, set a goal of moving half of the insurer’s provider to a value-based system by January 2020. | Pablo Martinez Monsivais/AP Photo

“Everyone is trying to figure out how do we get more value out of the dollar in spending. It’s not a left or right issue. Everyone wants to figure it out,” Cohen said in an interview in her Raleigh office. “We want to systematically try to embed food, housing, transportation, jobs into what is happening in the health system.”

Her erstwhile partner was Patrick Conway, who until early October was the CEO of Blue Cross Blue Shield of North Carolina, the state’s dominant insurer. In the Obama administration, Conway, also a physician, had led the Innovation Center, a laboratory for Medicare and Medicaid to test new ways of financing and delivering care.

Traditionally, health care payments were based on the quantity – not quality -- of care. Now, the mantra would be value, not volume, improving health while restraining costs.

Cohen and Conway are by no means the only people in health care who have sought to bust up the old fee-for-service models, to promote “value-based care,” or even to address how poverty drives poor health. But they were doing it in a uniquely broad, collaborative and fast-paced way, in a laboratory that spans the length and breadth of the state.

Medicaid and Blue Cross aren’t setting up identical metrics or models, but their waves of innovation overlap and reinforce. Cohen and Conway described themselves as rowing in the same direction, in a national health care environment that often seems to have far more oars in the water than it does boats. And given all the failures in spreading and scaling small local health care innovations, both of them were both thinking hard about what can be tested, adapted and exported outside of North Carolina to harness costs and improve quality in the $3.8 trillion U.S. health care system. Other states were watching.

North Carolina Gov. Roy Cooper, a Democrat, is working to expand health coverage to another 600,000 low-income state residents. | Travis Long/The News & Observer via AP

Their ambitious, dovetailed initiatives were moving right along – and may well do so again soon. But twin blows landed this fall: A bitter state budget stalemate triggered partly by the expansion fight, delayed Medicaid reforms for at least a few months, jarring providers who were already anxious about the coming changes. And Conway lost his job after news leaked out of a DWI-related accident last June.

Blue Cross, which had initially backed Conway but then asked him to step down, has named an interim CEO, and says it remains “fully committed” to its value-based path – although it also said in an open letter that it recognizes it must restore public trust after it failed to widely disclose Conway’s accident, arrest and his decision to take a leave of absence for treatment.

Several health care experts who follow Blue Cross or who are directly partnering with them on innovation projects, say the health plan is moving at a steady pace despite the upheaval. They had hired Conway in the first place because they were institutionally committed to bold change.

“All the elements are still moving forward – the state, other [health] plans, our work and Blue Cross,” said Mark McClellan, a health policy expert who led both the Food and Drug Administration and the Centers for Medicare & Medicaid Services under President George W. Bush, and who now is involved in health innovation in North Carolina as the head of the Duke Margolis Center for Health Policy.

Read more about what North Carolina’s health care transformation means for three health care providers: an urban safety net hospital that serves many homeless patients; a rural family doctor whose solo practice is being reshaped by the opioid crisis; and a clinic in a community that has been on an economic decline for decades.

UNDER CONWAY, Blue Cross had set the goal of having half its providers in value-based arrangements by January 2020. That means they will have incentives to focus on prevention, early intervention and managing patients with multiple chronic conditions. For both Medicaid and private insurance, keeping people out of the hospital saves money. Some of those savings can then be plowed back into addressing the social determinants of health – or “social drivers,” the term adopted in North Carolina. Conway had even made part of his own compensation, and that of his board, contingent on halving “food insecurity” statewide, not just for Blue Cross customers but the whole of North Carolina. Tools ranged from expanding Meals on Wheels to setting up a food pantry at a health clinic.

The health insurer was already seeing costs decline – not just grow more slowly but outright decline -- less than two years into Conway’s truncated tenure. Blue Cross has dropped Obamacare individual market rates by nearly 10 percent over two years; Its Medicare Advantage rates, which affect many more people, plummeted by 30 percent in 2019 – and an average of 31 percent for 2020.

The state’s “Healthy Opportunity” pilots for Medicaid won’t roll out for several more months – and the budget fight has delayed the managed care transition too. The first year or two of the pilots will be heavy on laying the groundwork -- building capacity, relationships and ways to do real-time evaluation so when something doesn’t work they can fix it -- or try something else. One goal is for pilots to span rural and urban counties, sharing and spreading services and resources, including the significant amount of data needed to make this all work.

A key element of North Carolina’s health care efforts expanding insurance coverage, particularly to vulnerable populations whose health is adversely affected by social factors like homelessness. LEFT: A Blue Cross insurance sign up table in Winston-Salem, N.C. RIGHT: A moment of silence during a Community Homeless Memorial dinner at St. Mary’s Episcopal Church in High Point, N.C. | Gerry Broome/AP Photo; Laura Green/The Enterprise via AP

Denise Foreman, an assistant county manager in Wake County, has been leading a population health task force that’s looking at the interplay of health and social needs in all sorts of public programs, from homeless shelters to jails. Wake County includes Raleigh, where social services are bountiful, at least compared to other parts of the state. But she envisions a six-county pilot, two urban, four rural. “We want to get the health, housing and transport people in the same room,” Foreman said in a coffee bar in downtown Raleigh. “You can put someone in cheaper housing at the outskirts of the county and give them a bus pass -- but that doesn’t help if there’s no bus.”

That resonates with Marilyn Pearson, the health director of Johnston County, southeast of Wake. Pearson runs a public clinic with an unusually robust set of services, offering everything from the bread and butter of public health (immunization, STD testing and the like), to same day visits for acute flare-ups of chronic disease, to mental health treatment, to handing out recipe cards using healthy locally grown vegetables and pointing patients to food pantries where they can get them. She deals on a daily, if not hourly, basis with housing, hunger, domestic violence.

Transportation is particularly irksome. Her clinic is close to a hospital, an inpatient mental health program and an assortment of medical services built around an abandoned textile complex in Smithfield. In a county that now has 200,000 people, a mix of its rural roots and growing exurbia, there is not one iota of public transportation. By law, Medicare and Medicaid dollars can be used for patient transport only under narrow circumstances. Anyone who isn’t well enough to drive, who doesn’t own a car, who can’t afford to fix the car or pay for gas, who can’t keep asking friends, family, neighbors or their church for one ride after another, can’t get to a doctor, a pharmacist, a physical therapist – unless they dial 911 to summon an ambulance, arguably the most wasteful and expensive form of “public” transportation on the planet.

Providers are nervous about all the changes in the pipeline, the new accountability rules and capitated payments. But they also see opportunities. For instance, under either Medicaid managed care or a value-focused Blue Cross Blue Shield contract, it could be a lot easier for Pearson’s patients to call a cab, not an EMT.

The flexibility under the Medicaid waiver gives Cohen money to spend, but she’s crystal clear about when and where Medicaid should directly spend its own money on social needs, and when it should catalyze action by someone else.

David Tayloe, center, founder of Goldsboro Pediatrics in eastern North Carolina, at an event in Washington with former Secretary of Health and Human Services Kathleen Sebelius. Tayloe sees potential in Blue Cross’s reforms, particularly for integrating mental health care into his primary care practice. | Luis M. Alvarez/AP Photo

For instance, Cohen doesn’t intend Medicaid to be the lead agency in every domestic violence case; but when a low-income pregnant woman with hypertension needs a safe place to live, Medicaid might step up, improving the mother’s health while lowering the risk of a preterm birth and a stay in the newborn intensive care unit, and all the costly long-term risks that entails (for both health and, potentially, education.) There’s no way Medicaid could, or should, rent every poor person a home, but two months’ rent for transitional housing with support services may give a patient who whirls in and out of the ER over and over again a better shot at recovery and stabilization.

For ahead-of-the-curve practices like Goldsboro Pediatrics, the opportunities are tantalizing, even if they’re apprehensive about payment changes. Most of the kids and teens Goldsboro treats at its four offices across two counties in eastern Carolina are poor. The practice was addressing hardship in its patients’ lives – handing out books the way other pediatricians hand out lollipops, pioneering an unusually close collaboration with local school-based clinics -- long before “social determinants” became a buzzword.

Deeply rooted in his community, the senior physician and practice founder, David Tayloe, is a fifth-generation country doctor from a line that dates to the Civil War. The practice now has more than a dozen physicians, along with nurse practitioners, physician assistants, social workers, therapists, a lactation consultant and a Medicaid care coordinator for complex cases. The practice is open nights and weekends; someone’s available by phone day or night. That reduces stress on working parents and diverts avoidable visits to the ER.

Tayloe is already taking part in Blue Cross’ value programs, but he isn’t quite sure how or when the state’s Healthy Opportunity pilots will reach his region. But as he meets with a broad array of community groups, the potential hits home, he said in an interview in his clinic earlier this year. He worries particularly about the pervasiveness of mental illness, estimating that it now affects 1 in 5 young people in his area. Then there’s the growing number of homeless kids, as housing becomes more unaffordable, even in this rural corner. “It’s disturbing,” he said. Not long ago, there were maybe 50 school-age children in families that lacked a permanent home. Now, he said, “it’s north of 250.”

While the Medicaid pilots ramp up, the state is partnering with United Way and other nonprofits on a social welfare online platform called NCCARE360 where anyone – doctors, nurses, clergy, community workers, a hospice -- can turn to get help for someone, whether it be housing, financial assistance, job placement, protection from abuse. By late summer, it was in more than 15 counties; it will roll out across all 100 counties in the state by late 2020, pulling together dozens of agencies, public and private.

Too often, a social agency gives a person in need a list of phone numbers and sends them on their way. In NCCARE360, the onus is on the helper, not the helpee, said Anne Thomas, a former public health nurse who is now president and CEO of the Foundation for Health Leadership and Innovation, the state’s partner in running the platform. There is transparency and accountability.

“This is the future of helping people,” said Tiffany Joseph, a ministry assistant at Temple Represents in Selma, N.C., who made the first NCCARE360 referral on behalf of a mother of three in a “volatile” domestic situation. “I log in and it shows me immediately resources that are available,” Joseph explained. “And once I send that referral, they reach out. I can see the progress. I can follow all the way through.”

NOT EVERYONE is sanguine about the coming transformation of health care in the state; some of the big health systems have been more open to it than others. A proposal earlier this year by the state treasurer to lower health payments for public employees (pegged to Medicare fees, though more generous) met fierce resistance and was withdrawn. Early adopters – the kind of doctors, nurses and clinics that grant interviews and tell visitors about how excited they are about change – tend to be the ones who are already doing what they can to tackle social drivers and value-based care. It’s the change-resisters that health care reformers have to worry about.

And despite all the attention Cohen’s Healthy Opportunities pilot is getting nationwide, it has a limited footprint. The idea is to scale, learn, scale some more. But as an analysis from the Kaiser Family Foundation noted, $650 million may sound like a lot but in a state as large and varied as North Carolina, it will go only so far.

And for all of the alignment Medicaid and Blue Cross are doing, they aren’t the only games in town. Other insurers are moving toward value-based care too, but not all at the same pace, and not all with the same metrics and requirements. Medicare, too, has its own set of rules, and that can still pull providers in multiple directions, noted Valerie Lewis, who studies payment reform at the University of North Carolina, Chapel Hill. The best health care providers will juggle competing demands; the worst will keep looking to game the system.

Mandy Cohen, North Carolina’s secretary of health and human services, top, has worked to gain support for her health care reform efforts from both Democrats and Republicans, including Gov. Roy Cooper, below left, and Senate President Phil Berger, below right. | Gerry Broome/AP Photo

And of course, there’s always politics in health care. Cooper may lose the governorship next year; that would mean Cohen would be out of her job. She’s done a good job of getting GOP buy-in from people like Berger, but there are no guarantees that a successor under a new Republican administration would stay her course.

“We’re not afraid to try new things,” said Yun Boylston, a physician at Burlington Pediatrics, in the central Piedmont region of the state. The group practice has already embarked on all sorts of efforts to address social determinants and chronic conditions, ranging from asthma to long-term consequences of childhood trauma.

But embracing change, and living with the nitty-gritty economic consequences of all the coming changes in North Carolina, can be unnerving, she said: “It will make or break our practice.”

Joanne Kenen is POLITICO’S executive editor for health care.



Authors: