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On Jan. 1, some 125,000 Oregonians entered a new health insurance epoch. Or so they were told.
“This is more than an upgrade,” a Providence Health Plan webpage said. “It’s a whole new experience.”
Several months in, numerous patients and health care providers report, the new experience has actually been terrible.
What had changed is that one of the state’s major health insurers had, for one-third of its Oregon members, outsourced many of its core functions to a Bay Area tech company, but the arrangement quickly descended into chaos.
Providence insists it had communicated with members about the change for months—one Providence executive noted “at least 19 different touch points” with members before the rollout—but for many patients, the shift was heralded by fresh health insurance ID cards that arrived in the mail.
Before, the cards had said “Providence Health Plan.”
Now they said “Providence Health Plan Powered by Collective Health.”
Grumbling naturally ensued: There were now various new online accounts and passwords to create, and some thought it was a scam. But the real trouble began when patients took the cards to get treatment, according to patients and health care providers who spoke with WW or filed public complaints with Oregon’s Public Employees’ Benefits Board.
Long-standing in-network care was suddenly, and incorrectly, classified as “out of network,” and care subsequently denied or delayed. Member ID numbers were altered, confounding providers and their billing teams, among others. Hourslong wait times ensued as the aggrieved parties sought answers. And for providers, payments came only after delays, if at all.
“I want to acknowledge this is not the way we wanted to start with this transition,” Providence Health Plan’s $2 million-a-year president Donald Antonucci earlier this year told PEBB, which self-funds and manages health benefits for state employees and their families, including, according to the Oregon Health Authority, about 87,000 people through the Providence Health Plan.
“I don’t know what else to say other than I’m very sorry,” Collective Health co-founder and CEO Ali Diab—a Google alum—said shortly afterward at the same meeting. He’d noted that the snafus were particularly embarrassing given the premise of his San Francisco-based company, a 10-plus-year-old firm that advertises on its website its ability to leverage “Collective AI,” or CAI™, to reduce the costs of health care and simplify the employee health care experience, without cutting care itself.
The company has reported receiving investments from some of the world’s most prominent investment groups. As of 2021, according to Bloomberg, it was valued at $1.5 billion.
Diab promised his staff was working hard to smooth things over, and indeed the situation has in recent weeks improved, at least for some. But the saga shows the ongoing perils of contracting out one’s work in the health insurance space—even to a well-funded tech company that promises to transcend the byzantine bureaucracy with a maverick Silicon Valley spirit.
Instead, numerous parties reported, the new regime—far from offering “a more streamlined, integrated health plan experience,” as Clackamas County employees, for example, were promised—simply appeared to add more opaque and annoying layers to that bureaucracy.
“I’m very confused,” wrote one Oregon Department of Administrative Services employee in a public comment, noting he had no idea how to get preauthorization for urgent care so his claim wouldn’t be denied.
“What we are experiencing is a highly fragmented system with no single point of ownership or end-to-end visibility,” said another plan member, who noted that families seeking to simply maintain continuity of care were being “forced to act as the coordinator” between Providence, its new subcontractor, and providers of health care services and medical equipment.
“It’s just a complete clusterfuck,” president Danielle Reghi of the Oregon Association of Acupuncturists tells WW.
By “it,” Reghi refers to more than just the Collective Health arrangement, but something broader: The Providence Health Plan—whose 368,000 Oregon members constitute the bulk of its reported business—recently started offloading more of its core work to subcontractors. And it’s infuriating many people in her association.
Some changes emerged this past fall. The Providence Health Plan had long used the third-party administrator American Specialty Health to do its credentialing for alternative medicine providers, but early this year the contract expanded: For certain Providence Health Plan commercial insurance cohorts, ASH was now the one to whom alternative medicine providers were supposed to send the bill.
Many of those providers were not happy about this; three tell WW that ASH is notorious for paying little and aggressively denying claims.
Asked by WW what value the company adds, an ASH spokesperson says it improves the member experience and “brings value to health plans by helping manage and process claims efficiently and cost-effectively. Through our proprietary clinical performance system, we help to improve the quality of care while reducing costs.”
To the confusion of many, the ASH contract expansion applied only to a subset of Providence Health Plan’s membership. A few months later, Collective Health came aboard to administer Providence’s self-funded plans—the kinds run for companies like Intel, or public-sector groups like PEBB.
It wasn’t just many patients who were surprised. Amber Reding-Gazzini, who runs the acupuncture and massage provider Hillsboro Wellness, says her staff were reverifying everybody’s insurance in the new year, but kept running into issues with the Providence portal. It “would be like, ‘Oh, well, this is a Providence plan powered by Collective Health, and these patients don’t exist in our system,’” Reding-Gazzini recalls.
She had never heard of Collective Health. Her staff members describe spending hours on the phone seeking answers and trying to get paid. In a late February email reviewed by WW, a Providence Health Plan representative told a staffer that “Collective Health “did not enter the correct contract” but would be “correcting that.” In recent weeks, Reding-Gazzini says, Collective Health has been catching up with old claims, but in some cases paying lower rates than before, and it still owes her thousands of dollars for numerous acupuncture and massage services it should have paid by now.
Alternative health care providers tend to be smaller operations that can’t afford such financial or administrative hassle. Many have voted with their feet, ceasing, according to Reghi and others, to take patients on the Providence Health Plan at all.
These changes do not occur in a vacuum. Independent experts caution against taking health system numbers at face value, but the Providence Health Plan does report having lost $102 million last year in operations, the worst figure yet in a several-year run in the red. The insurer is subject to the same industrywide pressures that have tested regional health plans nationwide, a spokesperson said, noting that members have been using health services at a higher rate and drug costs have come up, among other market turbulence.
Meanwhile, Providence Health Plan executive Scott Burton told PEBB in the mea culpa meeting earlier this year, many self-funded plans in particular had expressed needs—like enhanced claims and population health capabilities to help curtail rising health costs—that the Providence Health Plan would have needed years and hundreds of millions of dollars to develop internally.
In Collective Health, it found a partner, he said, who could deliver such capabilities at scale.
“The goal,” Burton said, “was and remains today to provide members with a more modern, more integrated and more responsive experience while working to create greater affordability in a historic period of health care.”
Change is often messy. But the resulting public comments were withering. Some complained of real annoyances and wasted time. “After the Collective Health partnership, I have yet to be able to reach anyone on the phone,” an Oregon Employment Department staffer observed. “Despite multiple assurances that nothing has changed in our coverage, apparently everything has changed in our level of service, and not for the better.”
Others noted more dangerous issues. “My son was previously approved for his medication (Nexviazyme) for a full year,” another PEBB member wrote. “His medication is the only thing that can sustain his life, due to his rare genetic disease. When PEBB switched to Collective Health, they automatically denied his medication and gave very little notice to us or his providers.”
Siobhan Martin, deputy executive director of Service Employees International Union Local 503 and vice chair of the Public Employees’ Benefit Board, summed up at the PEBB meeting what she had heard from members: “The disruption in care for some folks really did hurt people’s long-term health.”
The effect, Martin added, “was hard to even quantify.”
In a statement to WW, a Collective Health spokesperson wrote that the company “takes concerns from our client’s members and the provider community very seriously. We acknowledge that this implementation presented challenges larger than anticipated, and we understand that this frustrated some members and providers.”
Collective Health also noted that it worked quickly to patch things up—changes included adding staff, adjusting work flows, and working closely with Providence Health Plan leadership—and that service has steadily improved in recent weeks.
While many providers continue to have issues, there is evidence this is true. An Oregon Health & Science University spokesperson says, for example, that “eligibility-related delays” tied to the Collective Health transition were subsequently resolved by Providence, and the claims handling process “appears to be working now.”
Still, there is no good excuse for such issues, says Georgetown University researcher Karen Handorf, who has studied third-party administrative arrangements. “I would think an employer that hires somebody to do the claims—and do them accurately—should expect to have them done.”
Mark Pauly of the Wharton School cautions against beating up on private industry too much; the public sector struggles too, he said, noting the disastrous launch but ultimately successful development of the Obamacare system.
And yet, the veteran health care management researcher is not sure that private industry has some special magic to bear here. More than ever, in the AI era, excitement brews that mass data analysis could unlock previously unseen efficiencies, improving the health system as a whole. He says there’s lots of hope—more hype than reality thus far—but, at this point, who knows?
“All my MBA students are excited about the prospect,” he says. “But I’ve been around too long. I’m waiting to see.”
