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Executive Profile: Blue Cross of Idaho President Seeks Lower Costs, Healthier Clients

Posted on: Monday, 24 October 2005, 03:01 CDT

By Volkert, Lora

Putting himself through college was a big hurdle for Blue Cross of Idaho President and CEO Ray Flachbart.

I came from a working-class family, said Flachbart, who grew up in Cleveland. My dad never made more than $10,000 a year. He worked at the post office.

So when he enrolled at Cleveland State University, he seized on an area of study that was important to him: philosophy.

It's an area where you're talking about people's value systems, the meaning of life, how should people live, he said. I think the thread to me has been finding ways to make the world a better place.

You learn a lot when you can put yourself through school, he noted. I think that kind of work ethic is very important.

His philosophical orientation first pushed him toward urban planning. After receiving his bachelor's degree in philosophy and religious studies in 1973, he went to the University of Chicago to earn a master's degree in social sciences with an emphasis in urban studies, and in 1975 began work in the city planning department in Hammond, Ill.

After a few years, however, Flachbart yearned for a less political environment and he started going to the University of Chicago nights to study finance.

When he received his MBA in 1980, several attractive job offers were waiting for him, Flachbart said. But when he went to work at Amherst Associates, a financial consulting firm serving the health care industry, his fellow graduates told him he was crazy, he said.

I wanted to get into an industry that frankly could just help people, he said.

From Amherst, in Chicago, where he worked as a planning consultant to hospitals, Flachbart went on to Interqual, another health-care consulting firm, before joining Prudential HealthCare in 1985. Prudential took him to Connecticut, where he met Marybeth Hession, whom he married in 1989.

Marybeth was studying for a master's in special education when Flachbart met her, and now works as bureau chief for the Idaho Department of Education's Special Populations Services bureau.

Because he came from a blue-collar family, Flachbart had no professional role models as a young man. He found people to emulate among supervisors, but said Marybeth is my role model in terms of helping people.

Flachbart worked at Prudential until 1997, first in Connecticut, then in New Jersey and Texas. In 1997, he became senior vice president and general manager of AmeriHealth of Texas, a subsidiary of Independence Blue Cross.

In 2000, Blue Cross of Idaho, which had been searching for a replacement for retiring CEO Dave Barnett, selected Flachbart from among three finalists.

At Blue Cross, he's made changes to cut costs for members, add certain benefits, make it easier for employees to help customers, and expand the company.

The old vision of an insurance company was pay the claims and give me an ID card, said Flachbart. Today insurance companies have greater responsibilities to keep costs down and still give members access to health care, he said.

Since 2000, Blue Cross of Idaho has grown from 600 employees to 745. Revenue more than doubled from $378 million in 2000 to $807 million in 2004. The company plans to start construction by the end of the year on a fourth building at its Meridian headquarters.

The company grew from 302,000 members in 2000 to more than 400,000 members this year. Of that increase, nearly half - 45,000 accounts - came when the State of Idaho switched its benefits plan from Regence BlueShield to Blue Cross, citing lower administration costs and higher provider discounts.

After finding ways to speed up claims processing, Flachbart renegotiated contracts with health-care providers. We get a little better price from providers in exchange for quick payment, he said.

And a number of programs Flachbart adopted have cut administrative costs from 10 cents per premium dollar to 8 cents per dollar - a savings of $20 million this year.

Flachbart credits many of the ideas he implements to employees, from upper management to claims examiners and customer service representatives.

The most important thing a manager can do is respect all employees equally, he said. Everybody's important. There's nobody that's got to be put up on a pedestal, he said.

His biggest job is to enable them, he said. If you hire the best and the brightest, he said, the motivation issue takes care of itself. Blue Cross surveys its employees every two years to ask for suggestions of ways to reduce red tape and bureaucracy. They had great ideas, Flachbart said.

Employee suggestions led Blue Cross to streamline the process of setting up new group accounts - cutting implementation time in half - and to redesign explanation-of-benefit forms to make them easier to understand, reducing the time employees spent fielding questions.

The company improved its computer system so more claims could be processed in the automated system, and formed a team to expedite customer requests for non-standard benefits. Those suggestions also came from employees.

Flachbart has also found ways to reduce health plan costs by helping customers improve their health. The company's disease management program is one example.

The program employs three doctors and 20 to 30 nurses who help people deal with chronic illnesses like diabetes and asthma. Periodically they check with members to see if they're taking the correct medications, monitoring blood sugar and getting their eyes checked.

In 2001, Flachbart expanded the disease management program to include members with congestive heart failure.

The disease management program saves an estimated $3 in medical expenses for every dollar spent on it, Flachbart said. The congestive heart failure management program has saved the company and its members more than $1.8 million.

That's the beauty of this industry, Flachbart said. Very rarely can you find programs that improve people's health and quality of life and also reduce costs. When you find those, what a great opportunity to help.

Blue Cross does a return-on-investment analysis on new programs and adds only those that are cost-effective, he said.

These are our clients' dollars, he said. We take it very seriously that we don't just add willy-nilly.

Flachbart has also worked to reduce health insurance premiums by extending health care coverage to more people without insurance.

Uninsured Idahoans make up a larger percentage of the population than in many other states, Flachbart said. Costs for charity care provided by hospitals to the uninsured ultimately are shifted to the insured, he said.

To the extent that we can lower the number of uninsured in Idaho, we are lowering everybody's insurance costs, he said.

Blue Cross gave up part of its administrative fees and convinced medical providers and brokers to do the same to create Chamber Blue, a health plan for small businesses.

In the issue of creating more access to health care and creating affordable coverage, Blue Cross has been a leader thanks to Ray Flachbart's leadership, said Sandra Bennett Bruce, president and CEO of Saint Alphonsus Regional Medical Center, who serves on the board of directors for Blue Cross of Idaho. He is ever mindful of the actions we take and the effect they have on health care.

Bruce and Flachbart worked together on the Idaho State Planning Grant for the Uninsured and the Boise Metro Chamber of Commerce. She praised his work on Chamber Blue and his efforts to lobby the Legislature to expand children's health coverage and create vouchers for private insurance.

I find Ray to be extraordinarily bright and a very effective CEO, she said.

Since moving to Idaho, Ray and Marybeth Flachbart and their three children, 22-year-old Nick, 14-year-old Rachel and 11-year-old Katie, have plunged into skiing, snowboard, rafting, biking, and hiking in the mountains.

(Copyright 2005 Dolan Media Newswires)

Source: Idaho Business Review, The

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