PROVIDENCE – The selection of Peter Marino, the current director of the R.I. Office of Management and Budget, to be the next CEO of Neighborhood Health Plan of Rhode Island, brings number-crunching expertise and a strong backbone to replace the alleged feckless leadership of interim CEO James Hooley over the last two years, according to numerous sources.

Hooley had replaced Mark Reynolds, who had left in 2012 to become president of the Controlled Risk Insurance Company/Risk Management Foundation of the Harvard Medical Institutions. The first CEO of Neighborhood Health Plan had been Christopher F. Koller, who, after nine years on the job, went on to become the first health insurance commissioner in Rhode Island.

Under Koller and then Reynolds, Neighborhood had emerged as one of the top-rated managed Medicaid programs in the nation since it was founded in 1994 by Rhode Island’s community health centers, known for its excellent approach in customer service.

In the last two years, however, Neighborhood had floundered, according to critics, becoming increasingly subservient to the dictates of the R.I. Executive Office of Health and Human Services, through which the not-for-profit insurer receives the bulk of its more than $740 million in annual revenue.

Navigating a choppy sea change in health care
Marino, who will take the helm on Sept. 1, will confront numerous challenges as he tries to right Neighborhood Health Plan’s financial ship, which is apparently beginning to take on water.

• Neighborhood’s entry into the commercial insurance market, offering products on HealthSourceRI, the state’s health insurance benefits exchange, fell far below expectations.

Neighborhood Health Plan was able to enroll only 832 members in the individual market, compared to 27,129 by Blue Cross & Blue Shield of Rhode Island, a tiny 3 percent share of the market, according to figures provided by Dara Chadwick, spokeswoman for HealthSourceRI.

Initially, Neighborhood Health Plan had anticipated that “6,000 to 7,000 people” would join Neighborhood by Dec. 31, 2014, through its products for individuals and small businesses, according to Tom Boucher, Neighborhood’s spokesman, when asked about the insurer’s projections in August 2013.

In the latest proposed filings before the R.I. Office of the Health Insurance Commissioner, Neighborhood reduced its requested premium rate for 2015 to $298.78 per month [for a 21-year-old adult], compared to the 2014 approved rated of $311.88. The lowered proposed premium price, compared to the increases sought by Blue Cross, seems to reflect the need to make its health plan more attractive to customers. One of the biggest problems with the Neighborhood’s initial offering was its high premium and high deductible, according to a number of individuals interviewed that purchased health care plans through HealthSourceRI but did not choose Neighborhood.

Further, this year, Blue Cross and Neighborhood will face additional competition from UnitedHealthcare, which is entering the individual market for 2015, making Neighborhood’s potential to grow its market share even more tenuous.

• Despite more than $800 million in projected revenues by the end of 2014, making it one of the largest private companies in Rhode Island as measured by annual revenue, much of Neighborhood Health Plan’s revenue flows directly through its co-dependent relationship with the R.I. Executive Office of Health and Human Services, which manages the flow of the money to the health insurer through the state’s Medicaid program.

The not-for-profit health insurer was originally incorporated by Rhode Island's community health centers in 1994 as a way to assure a place at the table when the state, through a federal waiver, moved the majority of Medicaid beneficiaries into a managed care program, RIte Care.

Neighborhood currently manages two-thirds of the state’s capitated health care for Rhode Island’s Medicaid population, including RIte Care. It has often found itself in the difficult situation of not being able to “bite” the hand that is feeding it, being asked to deliver the same benefits for less money as part of efforts to trim the state’s burgeoning Medicaid budget.

Steven Costantino, the secretary of EOHHS, has allegedly been able to dictate many of the health insurer’s choices on policy, programs and reimbursement strategies.

The choice of Marino as CEO adds a new dynamic to the relationship: Marino was technically Costantino’s overseer at OMB; now he will be negotiating directly with Costantino [or Costantino’s replacement, depending on the choice of the newly elected governor].

• The not-for profit health insurer is scheduled to receive about $380 million in funds [about half of Neighborhood Health Plan’s annual revenues] to manage Rhody Health Options, as part of the state’s new Integrated Care Initiative for delivering health services for elderly patients who are both Medicaid and Medicare eligible, in the state’s FY2015 signed by Gov. Lincoln Chafee.

As much as the initiative’s goals are often positioned as a way to improve the quality and better coordinate how care is delivered, one of the driving forces behind the “reforms” is a desire to reduce the overall costs of Rhode Island’s Medicaid budget, now at about $1.9 billion, or about 22 percent of the state’s $8.7 billion overall budget. 



Medicare is not scheduled to become a participant in the realignment at least for another two years. But EOHHS has chosen to move ahead with Phase One of the realignment, implementing two programs, Rhody Health Options and Connect Care Choice Community Partners, in November 2013.



“We are looking to create a robust system of coordinated care,” said Elena Nicolella, director of Innovation at the EOHHS, told ConvergenceRI in December 2013. She acknowledged the initial phase of the program – managed by Neighborhood – is not the desired final product. 

“We are not purchasing the system we want,” Nicolella said. “The system that we want does not exist today.” Instead, the new programs should be seen as the initial step in building the capability to create a coordinated system of care.

The R.I. General Assembly enacted, as part of its FY 2015 budget, price protections for nursing facilities, so that the Rhody Health Options could not be used as a back door means to cut rates to providers, according to sources. As a result, savings will need to come from efficiencies, utilization shifts and better outcomes, placing some limits on Neighborhood’s management of the program.

• About $40 million in budget “savings” were achieved through rate reductions and projected eigibiity reductions to existing Medicaid programs such as RIte Care, in the newly approved state budget. While the "savings" preserved the illusion that no tax increases were necessary, Neighborhood Health Plan may be facing serious financial problems ahead with the Medicaid-managed RIte Care program.

Neighborhood Health Plan currently manages two-thirds of the Medicaid managed care programs, with UnitedHealthcare managing the other third. However, UnitedHealthcare initially proposed ending its contract as of July 1, but instead has agreed to extend the contract through Dec. 31, to enable further contract negotiations.

If UnitedHealthcare does drop out of the managed Medicaid program, the entire program could then become the responsibility of Neighborhood Health Plan, which may or may not be able to handle the additional responsibilities within existing resources.

Further, the state’s expansion of Medicaid has generated far more new members than predicted – including many new members who may not be eligible for new federal funding streams promised to support the addition of those adults without children who had not been insured.

Moving forward
Beneath the surface of the financial stresses at Neighborhood Health Plan is a more fundamental challenge related to health care delivery moving forward: what role will the network of community health centers play in the future delivery system in Rhode Island?

They have proven to be a source of high-quality, low-cost, and good outcomes in health care delivery in Rhode Island, focused in large part on population health, promoting prevention, integration of behavioral health and patient-centric primary care.

The state is in the midst of applying for the second round of the State Innovation Model federal funding, estimated to be worth between $20 and $40 million over the next four years, according to Dan Meuse, chief of staff of Lt. Gov. Elizabeth H. Roberts. The State Innovation Model will be run through EOHHS, as a division of state government.

Much of the plan involves the potential expansion of patient-centered medical home models of primary care championed by the R.I. Chronic Care Sustainability, or CSI-RI, including a new initiative, known as CSI-Kids.

However, the lack of shared savings achieved to flow back to the community health centers and group practices involved in the innovative delivery system transformation may prove problematic. Without that kind of incentive, the money will flow back to the state’s general revenue or to the health insurer – but not to the providers doing the innovative work on the ground.

The market waits for no one, and in terms of system delivery models, new bundled payments and continuum of care initiatives are blossoming in Rhode Island.

At the meeting of the R.I. Healthcare Reform Commission, when asked how the SIM design would integrated with existing bundled payment and accountable care organization models, state officials admitted that they didn’t know.

In 2012, Partners Healthcare, the largest hospital system in Massachusetts, acquired Neighborhood Health Plan of Massachusetts, adding to its customer base about 240,000 Medicaid-managed members.

In this age of consolidation, is it a possibility that one of the hospital systems in Rhode Island – Lifespan, Care New England, or CharterCare – could acquire Neighborhood Health Plan of Rhode Island?

Given the continued financial stress on Neighborhood Health Plan’s operations, this kind of acquisition may not out of the question.