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Heritage Provider Network’s Dr. Richard Merkin on healthcare innovation

Managed-care organization Heritage Provider Network, based in Marina del Rey, Calif., has focused on accountable care and value-based care since its inception in 1979. Now, its network of more than 3,700 primary-care physicians and 12,000 specialists serves more than 1 million patients in Arizona, California, Missouri and New York. Dr. Richard Merkin has led the network from the beginning and continues to look for cutting-edge treatment and innovative solutions to improve care. Modern Healthcare News Editor 
Erica Teichert recently talked with Merkin. The following is an edited transcript.

MH: What do you feel has helped Heritage be so successful in the ACO program?

Merkin: What has helped Heritage, generally, is not embracing the status quo, but embracing change. Our charter has always been to do things that have never been done before. I think taking that approach, taking a less traveled path, has helped us become what we are today.

MH: Can you give me any examples of what you’ve done that you feel has never been done before?

Merkin: When we first started, everybody was sort of doing the same thing. We looked at value-based healthcare as a blank slate. For example, in 1979 we started what is today a hospitalist program, with dedicated positions in 
the hospital and in the post-acute settings. I think it was 1996 when it became a specialty. But we invented that.

We were the first physician-owned organization in the country that managed the entire care of the patient, which, is considered global risk today, for a fixed dollar amount.

We use machine learning; we use artificial intelligence. Part of our team includes professors of computer science, people who would normally not be part of a medical group. We have relationships with public-private partnerships with Harvard, MIT, Cal Tech. More recently, we started the Institute for Transformative Technologies in Healthcare, which more formalized things we’ve done for many years.

MH: That’s interesting that you’ve brought in people into your network that you wouldn’t necessarily think of as healthcare providers.

Merkin: Their goal is not to do what has previously been done. They want to do something that will have an effect on healthcare at a very broad base. Now, mind you, what I normally see is we get lots of people from Silicon Valley who come to us and say, “I have this great solution. You have a problem that it fits?” And we didn’t think that worked. So what we did is we’ve taken these very talented, smart and educated computer scientists and brought them in to different departments and had them educated on the nuances and the issues that practicing physicians have every day. And the different regulations, etc.

MH: How has the healthcare industry changed during the last several decades and where do you see it going forward?

Merkin: Change is accelerating exponentially. It used to take a longer period of time between something being invented and it being implemented. Today, the time is truncated.

MH: The CMS recently announced that it’s going to retire zero- and low-risk ACO tracks. How do you think that’s going to affect the industry’s move to value-based care?

Merkin: Physicians have to take on more responsibility. I think we’re going too slow. Physicians have to work together; they have to collaborate. I think culture unlocks value. I don’t think we would have been able to achieve what we have unless our teams were unified, worked together as a team, and worked hard to serve our members. I think a lot of these programs are stop-gap, they’re evolution. You go from horse and buggy to electric cars or you go to a faster horse and then a motorcycle.

MH: You’ve mentioned how innovations are developing faster than ever now. And then you juxtapose that versus the ACO program and the move to value-based care. And from your perspective how slow it seems to be going.

Merkin: Our organization went from fee-for-service to global risk immediately. And we built systems for global risk. So, we were responsible for the totality of care. At least initially, we were responsible for pharmaceutical cost, also. The health plans, over time, found that there were many groups that couldn’t manage that. And part of it was lack of data. Generally, medical groups are not held accountable for pharmaceutical costs. But now we are doing this incrementally. And I’m uncertain if that’s the best way to do it.

MH: Was changing from fee-for-service to global risk a challenge for Heritage?

Merkin: It was exciting. Necessity is the mother of invention. When we started we were challenged by Blue Cross and Blue Shield, who said, “This is impossible.” And yet, that was what caused us to find it exciting. The crazy ideas of one day, like putting a doctor in the hospital full time, was a breakthrough the next. Having a team of doctors evaluate a patient for best outcomes was a crazy idea. Doctors, historically, didn’t work in teams. Today, that’s pretty routine. We found it stimulating.

I would suggest that all of the people who were the creators, none of them had any experience. So they did not know what could not be done. What we tried to choose were people of talent, grit and resilience. In fact, the first person that I hired, I only asked him one question. He was a chemistry professor. And I asked him, “If you hear no, no, no, no, no, no all day long. By the end of the week, do you get depressed?” And he said, “No, I’m pretty resilient.” And the reason that I asked him that is he was doing something that’s different from what other people were doing. And people don’t like change. So you’re going to hear no a lot. But you only have to hear one yes. And I believe very strongly that one person can change the world.

More recently, people with experience applied for positions and they say, “Oh, you can’t do that.” And we point out that we’ve been doing it for 20, 30 or 40 years. But they don’t believe something can be done because they “already have experience” in other organizations.

The other thing that I see frequently is people who say, “Well, I’ve had 20 years of experience.” And I find out that frequently they’ve had one year of experience 20 times. And they learn a job in the first few months or first six months. And they had been doing the exact same thing their entire career without evolving, changing. The environment is constantly changing, and you need creativity, curiosity. Why can’t it be done differently? Why can’t something be done just because you’re the first on the block to do it?

MH: More insurers, including Oscar Health recently, are diving into the Medicare Advantage space or harnessing narrow networks. How could that benefit providers and patients?

Merkin: They are certainly looking at healthcare differently than it has been looked at historically. It will be interesting to see how they approach the senior market, which is a different market than commercial. I’m certain that their experience with what they’ve done now, they will be able to build on. And take into consideration the differences, and hopefully they will be successful and help make the MA program even more successful than it has been.

MH: How do you define value when it comes to healthcare?

Merkin: We believe value is giving people the access to care they need to prevent unnecessary and avoidable health events. And to do so in an environment that is characterized by very high quality, and importantly, excellent patient experience. Just by definition, that would lower the cost and make healthcare more affordable.

MH: Do you think the incentives are properly aligned for providers to really add value to care?

Merkin: Unfortunately not all incentives are properly aligned. But I see that there has been great progress and a much clearer understanding across the country of the direction in which we need to head. It’s a continuing mission, but it’s getting better.


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