A pediatric oncologist by training, John Blank had to help people deal with a lot of bad news during his medical career.
As a health plan executive, Blank had to help Unison Health Plan face the fact when he arrived in 2004 that there might be trouble on the horizon for the managed care company. “When I came here, we were a Pennsylvania company with virtually all of our business in Pennsylvania, with 95 percent of our revenue and 99 percent of our bottom line coming from the Pennsylvania Medicaid program, and we’ve been very successful with that,” says Blank, Unison’s president and CEO. “But we were so Pennsylvania-focused that, like any business that has one major customer and the Medicaid program in Pennsylvania, like any other state, has challenges in financing and changes in the politics of the state that change direction or emphasis that it was a concern to me that we were so focused on one state.”
When you depend on one product and one source for all of your income, your fortunes rise and fall with those of your customers. And if they decide to turn off the tap, you can be in a real fix. So Blank, a 20-year veteran of the managed care industry, knew that Unison with 2005 revenue of $713 million and anticipated 2006 revenue of $1.2 billion had to do a couple of key things to grow and avoid a potential catastrophe. It had to expand its product portfolio, and it had to reduce its reliance on Pennsylvania’s health coverage program for low-income residents. “So my major challenge and focus was to move from being a very large mom-and-pop company into a much more diversified one, and instead of a centralized management, starting to move decision-making and management processes out to the organization,” says Blank. “So now we’re in five states with eight different product lines. We’re over $1 billion in revenue, and Pennsylvania still accounts for about 60 percent of our revenue, but as we continue to grow, it will be a decreasing share. “My goal is to get to a point where no one state, no one customer, is more than 20 percent to 25 percent of our total revenue.”
Leveraging core competencies
“The first thing we did here was to look at our core competencies, what is it that we do really well, and how can we leverage those core competencies to go into other markets,” says Blank. “One of the questions was, ‘Gee, we’re really good at the Medicaid business in Pennsylvania. What are the other things that we can do to take advantage of those core competencies?’ “The first thing was, what diversification can we get into just in Pennsylvania?”
Blank says Unison Health Plan was positioned well to expand in Pennsylvania, because, unlike commercial insurers, it has deep experience in running government-sponsored plans. “The regulatory and reporting challenges of government programs can really stymie you if you’ve been used to dealing as a commercial insurer,” he says. “So we took that expertise and said we can probably apply that expertise to other government programs, like Medicare, and we moved into Medicare last year. We had a large number of Medicaid members in Pennsylvania that were dual-eligible that moved right into our Medicare program, so we have about 15,000 Medicare members in the state. “That wasn’t geographic diversification, but it was certainly diversification by product line.”
Blank expanded the plan with contracts for several other programs, including the adult basic plan, a subsidized program for low-income adults and a subsidized plan for children of low-income families. While they were beyond Unison Health Plan’s traditional business line, they were well within its core competencies. “One of the things we’re good at when you look at our core competencies is we work very well with government programs, we understand the ins and outs of government programs, we understand the regulatory issues,” Blank says.
Introducing structural change
Blank knew that expanding business across multiple states meant the structure of the management team would have to change. “One of the big things we had to do was regionalize,” says Blank. “So we could no longer have one finance team, for example, or one legal resource, because legal issues, and even the reporting issues, are dramatically different in each state. You would drive people crazy.”
For instance, because individual states have specific regulations and requirements, some individuals who once had responsibility for one function had their focus narrowed to a more specialized area of that function. Blank says that created some discomfort, because it was perceived by some as a reduction in their responsibilities.
To allay those concerns, Blank redefined the nature of each team member’s responsibilities. “When you move to that segmentation, there’s a sense of, ‘I don’t have as big a job as I used to have’ ... and I think that was both good news and bad news for people,” says Blank. “It took less explaining and more reassurance that this is not a reflection on you, it’s just a reflection of how the company has grown, and that’s the good news. We’ve got to get a new model because the old model doesn’t work. “We were clear that the complexity brought about by growth would require specialization. In that regard, we talked about responsibility getting narrower and deeper.”
Because expanding the plan’s geographic reach and product lines meant expanding Unison Health Plan’s work force, it was important to Blank that new management team members coming in to the organization knew that the change was going to be comprehensive and that they were prepared to handle it. “This is probably the greatest challenge and the most difficult to articulate,” says Blank. “The best approach is to be almost brutally honest about the challenges and the opportunity, clear discussion of how one deals with change, what kind of experience they’ve had with that and if the change created anxiety. If they don’t admit the anxiety of these situations, I’ll almost always pass on a potential team member. “The issue for me is not ignoring the difficulty of these situations, but rather, how do they harness it to be successful?”
Blank says that in a business where so much rides on single transactions and the great deal of effort that goes into pursuing them, it’s easy for team leaders to feel a letdown when they fail to get a contract. Part of his role is to make sure that they don’t get discouraged and, instead, learn from the experience. “The other piece of it that was important was to reassure that failure is to be expected,” Blank says. “You’re going to kiss a lot of frogs to find a prince, is what I’ve been telling them. Georgia is a good example. We went out and spent about a year building a network infrastructure and didn’t get the business. “Well, there are a lot of good companies that didn’t get the business. It’s not something to be ashamed of, it’s something to learn from and something to continue to strive for. But it’s very tempting to say, ‘We didn’t get that business, what’s wrong with us?’ So you have to be a cheerleader around that.”
Blank says that when there’s good news to report, it’s usually others who deliver it. A plan president, for instance, will be the messenger when a new contract is landed. But when there’s bad news, when things haven’t gone well, Blank is usually the one to break it. “I think it models for folks that it’s OK to make mistakes, and it’s important to acknowledge when things haven’t gone so well,” Blank says. “The most important thing to do when things go badly isn’t to find out who’s to blame but find out how to fix it to make sure that it doesn’t happen again. “It’s just information, it’s not a character assassination. I think it does send the message that taking accountability and it starts with me is what is expected of leaders. The issue is not that failure is bad but that it has to be managed. You have to balance it with holding people accountable, setting goals and reasonable expectations.”
For example, Unison bid on a Medicaid contract in Georgia, a large state with more than a million Medicaid recipients, but didn’t get the deal. While it was a disappointment, Blank took it in stride, preferring to examine the results to determine what the plan should do to hedge its bets on future bids. “We realized that there are worse things than not getting a contract, primarily getting one that you are not totally prepared to manage,” says Blank. “We focused our energy on how we would have implemented this and used the experience to prepare us for the next opportunity.”
The exercise paid off, paving the way for subsequent wins in other states that have bolstered the plan’s enrollment and accomplished some of the diversification that Blank was seeking. “That preparation and a frank review of the opportunities for improvement led us to be able to successfully win our next three proposals,” says Blank.
Learning from the wins
While taking careful stock of a losing effort to figure out why you didn’t win the business is critical in any organization, Blank says taking a hard look at successes can be just as important, instructive and lucrative. One of the company’s huge successes a contract it secured with the Ohio Medicaid program got as close an inspection as did the loss of the Georgia bid. “When we won the Ohio bid, I did a post-mortem on what we did that worked,” says Blank. “When we didn’t get the Georgia bid, I did the same thing, and people expected that. When we won the Ohio bid, I said, ‘Let’s sit down and see why we got that.’ People were shocked, wondering why we were scrutinizing something that was successful.”
But Blank’s instincts were right. It turned out that there was a section of the bid where the plan hadn’t scored as well as it should have because it had misinterpreted what one of the questions was asking for. That attention to a successful bid, it turned out, was as important to landing future business as a self-examination of a failure could be. “The next time, we corrected and did even better in the next region that came up for bid,” Blank says. “So I think it is as important for folks to say we always have to be looking at how we’ve done, how we could do better. You can’t just say we won the game, let’s not worry about what we didn’t do.”
And it’s not that Blank doesn’t believe that an organization shouldn’t take time to bask in the glow of success. “You need to celebrate and take the time to pop open the champagne, but you also need to look at what is it that we did that didn’t work, and I guarantee you if you take your successes and you analyze them, you’re going to find two or three things we could have done better,” says Blank. “That’s a striving for success that I think translates well.”
HOW TO REACH: Unison Health Plan, www.unisonhealthplan.com