Shop Talk with Fallon Health
February 20, 2017
SHOP TALK
Fallon CEO talks scenario planning for Trump's changes
PHOTO/BRAD KANE
Richard Burke President & CEO, Fallon Health, Worcester
In March, the board of Fallon Health selected 19-year company veteran Richard Burke as its president and CEO, after he served in the interim role for six months. With nearly a year under his belt and the company preparing to celebrate its 40th anniversary, Burke is working to return the nonprofit to a positive financial margin while preparing for changes in health care.
What has been your main focus as CEO?
Fallon has always been innovative, changing with the healthcare landscape. That is what I want to do: carry on the legacy of high quality and being innovative.
I have spent a great deal of time this year charting out a path to take care of upcoming challenges and opportunities.
What are the challenges?
It is a challenging time for the industry. Some of it is cyclical, and some of it has been caused by very challenging healthcare legislation. We had to adapt to the Affordable Care Act, and it looks like we are going to have to adapt again. This has been a challenge for all health insurers, and Fallon is no exception.
One of the unique challenges for us in Massachusetts is we as a state already had our own healthcare reform in 2006. As a result, we achieved record numbers of individuals covered – 97 percent of the population. With the ACA, we had to come into compliance nationally.
There were many bumps in the road that came with those changes in 2010, and those changes came with a pricetag for us.
How will Trump's planned repeal of ACA impact Fallon?
It is too soon to tell. My sense is something will change; the questions remains what it will be and when it will take place. We stay very close to the developments on the state and national level, so part of it is making us aware of what the possibilities are.
As a company, we have to do a certain amount of scenario planning, to prepare as best as possible for the unknown. We think about the possibilities and how we could adapt to those.
What are the opportunities?
As the population continues to age, Fallon's history of providing for elders – particularly frail elders – will continue to grow. That is one growth area for us, and we are proud of what we are able to do to help seniors and their families.
What sets your products apart?
Our programs are really focused on a team approach to care. When you peel it all back, that is how you provide care to that population, through a team: doctors, nurses, other healthcare providers. We have navigators here at Fallon whose job it is to help people navigate the system. Health care often is experienced in a very fragmented way, and our approach helps us connect those parts of an otherwise fragmented system.
Fallon reported a net loss of $7 million for 2015 and is on track for a similar 2016 result. What is causing this?
There is a cyclical nature to the insurance industry, and it is a challenging period for the health insurance industry in Massachusetts. Certainly, our goal is to cover all of our expenses with the revenue that we have, and we want to have a modest margin. We are in a cyclical phenomenon in the market right now.
What is a successful margin for Fallon?
An ideal margin for us would be 1-2 percent. We keep our administrative expenses very low, and the majority of our resources go to providing care.
How can you rein in the cost of care?
You really have to get at the underlying cost. The solution is going to come from closer connections between insurers and providers of care, focusing on quality and cost together. We will see more of that in the future.
Will Fallon enter into these arrangements?
Massachusetts is focused on creating accountable care organizations where insurers and providers of care jointly take responsibility for the cost of providing care to a segment of the Medicaid population, focusing on quality, access, affordability. We are in a number of very exciting conversations with providers to build these ACOs.
This interview was conducted and edited for length and clarity by Brad Kane, WBJ editor.
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