As his career evolved from public sector administrator to private sector entrepreneur, Doug Forrester learned a lot about healthcare delivery — much of which he didn’t like. As director of pensions under former New Jersey governor Tom Kean, Forrester was responsible for the state’s health benefits plan, which then covered about a million public employees and dependents.
Forrester was the Republican candidate for U.S. Senate in 2002, in a race won by Democrat Frank Lautenberg, and for New Jersey governor in 2005.
The decade prior, however, Forrester had no role in government. In 1990 Forrester founded BeneCard, a pharmacy benefits management firm that provides prescription drug coverage to mid-size employers. From these two vantage points, he became intimately familiar with serious problems in the provision of health benefits — problems he is doing his best to resolve in his new business, Integrity Health, a Carnegie Center-based health benefits management company for self-insured public and private sector employers.
In the 1980s New Jersey’s health plan was huge, covering two-thirds of the state’s teachers, all state employees, and about half of local government employees. Yet it lacked an essential ingredient for good management: cost data that could be analyzed, audited, and used for planning.
Things haven’t changed in the nearly two decades since Forrester’s retirement from the public arena. “It is beyond question that there is very little data available to public employers in terms of making decisions about their benefits plan expenditures,” he says.
Forrester traces the absence of cost data to the insurance companies that, until recently, ran all public health plans in New Jersey. Because these plans were required to be fully insured, employers had to buy coverage from insurance companies, which usually meant “the bucas” — the four large carriers, Blue Cross/Blue Shield, United, Cigna, and Aetna.
With these plans come what Forrester calls a “black box approach to data.” Employers pay a designated amount per employee each month and do not get back any data about healthcare costs — what happens inside the box. The only information that the insurance companies share is the bad news about price increases for the following year.
Another serious problem was focus. What should be a company’s primary goal, in his estimation — better health for the individuals covered — does not get sufficient attention. Instead the plans concentrate their efforts on sick care rather than health and wellness.
Yet health is exactly what the managers who select these plans are looking for when they lay down healthcare dollars. “Any good management approach asks, ‘How do I get the best return for this investment?’” Forrester says. “The investment here is in the health of employees and their loved ones — to make sure people are productive on the job and their loved ones are well so employees are not distracted on the job.”
Doctors also do not get all the data they need to make the best decisions for their patients. “One doctor doesn’t know what the other doctor does because the information is not available,” says Forrester. Because prescription and medical benefits are not integrated, the details of a patient’s prescriptions are another missing link.
The final issue afflicting the industry, he says, is a claims-processing system that is often riddled with errors, with forms and explanations that are hard to interpret.
As Forrester pondered ways to solve these problems he faced a family crisis that brought everything into focus. In 2004 his 17-year-old daughter, Briana, had serious bleeding in her brain from an Arterio Venous Malformation, similar to a brain aneurysm. When an AVM bursts, it creates uncontrolled bleeding requiring immediate, risky surgery. Briana, now a psychology major at the College of New Jersey, survived multiple surgeries and struggled through a month in a neural intensive care unit and months of rehabilitation.
Then, it turns out, Briana had contracted Hodgkin’s disease. When the bills started to arrive, the Forresters faced “an army of bureaucrat,” Forrester writes on his company’s website. “Some were indifferent, some incompetent, and some tried to be helpful but even they couldn’t always penetrate the labyrinth of the healthcare system to resolve problems. His wife, Andrea felt like a pawn in a bizarre game whose rules were impossible to understand. Finally, the family gave up and hired a professional accountant to handle bills and be their advocate.”
“We were fortunate,” says Forrester. “We didn’t have to worry about where to find the money to pay the bills. The issue was that we couldn’t comprehend the bills; we had to hire someone to sort through and understand them.”
Forrester suggests that these obtuse bills were somewhat deliberate. “It is part of the game,” he says. The billing issue is an outgrowth of a system where costs and the compensation for them do not necessarily match up, particularly as hospitals have had to shoulder responsibility for uncompensated or partially compensated care through Medicare and Medicaid over the last 25 years.
The result, says Forrester, is a system of billing that is convoluted, dysfunctional, and wasteful. “The way in which the economics of healthcare have grown up, it is to the advantage of individual providers to try to get as much as they can from a system that is basically opaque to the patient. The patient is the pawn in the game between providers and insurance companies.”
To tackle the serious problems in the health benefits industry, Forrester stepped into the public plan sector and created Integrity Health in the wake of a change dating from January, 2007, when the state legislature had canceled the requirement for public plans to be fully insured. The legislature promoted instead the use of self-funded plans in which the employer, not the insurance company, controls the benefits plan. Integrity Health opened in July, 2008, to design and manage self-funded programs for public and private employers.
Companies that are self-funded insure themselves up to a certain level based on projected health expenditures and then purchase “stop loss” insurance to cover unexpected costs beyond these projections. Specific coverage means buying protection where the insurance company pays costs beyond a catastrophic level set for any given individual. This might come into play, for example, for premature twins, where bills can run as high as $1 million per twin. Aggregate coverage caps overall exposure for an employer with coverage that comes into play if cumulative costs for all employees go beyond a designated level.
Integrity works like this: Employers will buy health coverage for their employees; they will contract with entities to procure those services, to an insurance company, or put together claim processing structure. Fees are fixed based on number of employees, but Forrester will not say what those fees are. “It is a contractual matter we only talk to buyers about,” he says. “The whole purpose is to save money for the client in terms of both claims costs and administrative expenses.”
Forrester advises employers who are reluctant to self insure for fear of taking on so much risk: “Ultimately one of things that employers should understand is that sooner or later all of the risk is theirs. The idea is that if you have a fully insured plan, the risk is always with the insurance company. That may be true in one year, but the reality is that over time the employer pays for it in rate renewals.”
Few public employers in New Jersey — a pool of 611 school districts, 566 municipalities, 21 counties, and several hundred authorities of varying stripes — have anything other than a fully insured arrangement, says Forrester. But Integrity is doing its best to bring more public-sector employers into the self-insurance fold.
Forrester founded Integrity Health to put the control of health benefit plans into the hands of employers. “We don’t offer a health plan,” he says. “A health plan is an insurance company’s product. We help the employer create its own plan and then do everything to manage that plan.”
A health plan has several components: a network of physicians; a claim-processing function; a financial component, otherwise known as insurance; a marketing function; commissions paid to benefit consultant brokers; and a medical management function, which comes into play for more complicated medical conditions, such as cancer, that require careful coordination to ensure that all medical needs are delivered efficiently.
Integrity Health manages the employer’s existing plan that was negotiated by the union, including standard coverage for hospital, surgical, and major medical. “We don’t care what the benefit design is, we can duplicate that,” he says. “We will set up a clinic and more carefully audit claims from providers. It’s a combination of being more rigorous with regard to management issues and being more philosophically sound about getting folks into an environment where they are aware of prescription usage or life cycle patterns that have never been addressed.”
“We will deliver equal or better benefits, which is important to union groups,” says Forrester. “It is not our plan; we’re not trying to shoehorn someone into our plan.” As a health benefit manager, Integrity Health is responsible for securing the resources that provide the best service, with the goal of developing long-standing partnerships that will minimize the need for change.
Integrity Health gets paid a management fee for operating the plan. “Our goal is to reduce overall expenditures — the size of the check that the employer would write for a health benefit plan,” says Forrester. “We have been founded to get a hold of plan costs, to deliver better care for better expense.”
The first step Integrity Health takes toward reducing health costs is to make everything transparent to the people paying the bills. Fully insured plans keep information about costs and expenses to themselves, sharing only the benefit design — what is covered, what the co-pay is, and the monthly rate per employee.
Integrity Health, however, opens up this black box and reports where all the employer’s money is going. This allows employers to assess the effectiveness of their plans and also to investigate incorrect billings that are not necessarily a mistake. “It’s become a Wild West out there,” observes Forrester. “Networks are eroding, and providers are billing what they want.”
In fact, 97 percent of hospital bills nationally contain incorrect billing information. These mistakes range from incorrect reimbursement amounts to incorrect procedure codes. To ensure that bills are correct, Integrity Health puts medical and prescription claim information online, where people can easily check whether their bills match the services they have received.
“We want people to see what is going on with their plan and what kinds of claims are coming in,” says Forrester. To protect group members from mistakes that will become part of their permanent medical records, Integrity Health “has a very aggressive member services group that interfaces directly with individuals who have claim payment issues.”
The company also uses the web for far more than claims information. It views the Internet as a critical avenue for improving employee health by encouraging health screenings and early intervention, promoting health and wellness, and promoting dialogue with primary care physicians. “That’s where the real savings is,” says Forrester. “A well person is a lot less expensive than a sick person.”
Although most people covered by a major carrier can probably get claim information online, Integrity Health includes informational flags and alerts for employees. A sophisticated software system, written by Stephen Kardos, CEO of Triveris in Eatontown, “automatically captures the user’s lab results, health history, pharmacy records, and claims data; identifies potential health risks based on this information; and recommends appropriate actions for staying healthy,” according to the Triveris website. This health information is security protected.
The idea of this system, called “My Health Advocate” by Integrity Health, is to give people information to share with their physicians, who will then be better able to advise patients about health and wellness. “We always try to drive people back to their doctor,” says Forrester. “We highlight something people should talk to their doctor about.”
A new prescription, for example, might raise an alert about possible drug interactions. Or suppose a person is taking a cholesterol medication that has even a slight possibility of causing a severe liver problem. If the system finds no data that the person has undergone a blood test for liver screening, it will suggest whether having a liver screening makes sense. Forrester’s early data suggest that many people are using this kind of personalized medical information.
Also available online is a range of other information: generalized health information, product recalls, alerts about health issues (like reducing radiation from medical X-rays), avoiding drug interactions, reducing salt in the diet, and understanding influenza vaccines.
There also is an assessment of any medical risks faced because of family history, life style, or environment; information on preferred pharmacies and labs, co-pay instructions, and the benefit plan; a current indication of coverage for each doctor or hospital visit; whether selected doctors or hospitals are in-network; and a listing of area doctors, hospitals, and labs, based on the plan.
Whereas insurance companies are able to encourage fitness with strategies like threatening higher deductibles for people who do not exercise, public health plans must motivate healthy behavior voluntarily. Given this constraint, Integrity Health is making the anchor of its program a health center with a clinic on one side and a fitness center on the other. “We believe strongly that both should be together in the same building so people get the point that you can’t have the health you want unless you pay attention to matters of fitness,” says Forrester.
The first center opened on October 15 for the combined Toms River and Seaside Heights school districts — Integrity’s only clients so far, though Forrester says there are others in the pipeline ready to begin in January — and serves approximately 7,500 employees. The physicians and nurse practitioners at the health center are trained to think in terms of fitness as well as treating more immediate issues of illness.
“We are trying to make the point that healthcare is not just an issue of repairing the body, but an issue of prevention,” says Forrester. The goal is to focus on face-to-face interactions and individualized counseling. The clinic is open 12 hours a day on weekdays and about five hours a day on weekends, with a doctor always present.
The presence of clinics limits the the types of organization that can take advantage of Integrity.
“We believe that while the program is appropriate for anyone, we believe it is particularly well suited to public sector employees like school boards, towns, and counties,” Forrester says. “We deal very well with public employee bargaining groups; part of the goal is to win the confidence of the employees that there is a better way to health.
The whole purpose is to get them the kind of healthcare attention they need as quickly as possible. When you do that, you save money.”
In order to have the clinic generate savings in first year, though, a company needs several hundred employees. Integrity’s market is 500 employees or more. Smaller employers might be able to band together with like-minded public employers in the same vicinity to develop a joint clinic.
The clinic is conveniently located on the employer’s property where patients receive primary care quickly and without any financial transactions, co-pays, or deductibles. Furthermore, if drugs are prescribed, patients can pick up most medications on the way out, again with no cash transaction. If they choose to fill the prescriptions elsewhere, they would have to pay the normal co-pay required by the health plan.
To provide the best medical care for plan employees, physicians at the clinic are supplied electronically with as much information as possible. “Part of the problem in the United States,” explains Forrester, “is that often the physician doesn’t have all the information at hand that is relevant.” Patients who come to the center, therefore, give permission to clinic doctors to see all claim information from providers paid through the plan.
While no formal or financial agreement exists between Forrester’s current and former companies, Integrity’s client list does sometimes overlap with BeneCard’s. Forrester sold his interest in BeneCard in 2005, during his run for governor.
Forrester’s Democrat opponents accused him of washing campaign funds through his insurance-related companies — a charge he denied in a campaign he largely funded with his own fortune, which is somewhere between $50 million and $100 million.
Through BeneCard, the school district’s pharmacy benefits manager and Forrester’s former company, clinic doctors get an electronic feed of all transactions at the clinic’s outpatient pharmacy. Forrester notes the similarities between BeneCard and Integrity Health. “We have common ground in terms of philosophy about what needs to happen in the marketplace,” he says.
He brought in BeneCard both because his client was eager to have an integrated health benefits program and because BeneCard sees the value for its own business of working closely with the medical side of the health plan.
“It’s important to link medical with pharmaceutical information so people get the right therapy and so physicians know all the prescriptions people are taking,” says Forrester.
This linkage alerts physicians to prescriptions that may interact in dangerous ways. The clinic is also working on ways to inform specialists about the full range of prescriptions for its patients.
Establishing the clinic was important not only for health reasons, but also for financial ones. The idea for the health center itself was data driven.
Not only was it responding to data on heavy emergency room usage but also to data on doctor visits for conditions that ultimately were not identified by a clear illness category.
“This suggests that people are feeling bad and go to the doctor. It is expensive, and a health center is a much more efficient way to deal with this financially,” says Forrester.
A few years ago, unbeknownst to the school districts, emergency room claims were being processed to be paid at 100 percent, irrespective of diagnoses. In other words, there were no out-of-pocket costs for the patient. As a result, people started going to the emergency room for primary care treatment.
“This happens all over New Jersey,” Forrester says. “People use emergency rooms as a doctor’s office, which is not good for health or financial reasons.
The reason we put in a clinic is to provide a better and more economical place for that to occur. It is a wonderful combination of smart health and smart finance.”
The issue of inappropriate emergency room use has been under discussion by New Jersey’s health benefits commission, which runs the state’s health benefits plans. “It is a big problem,” says Forrester. “They’re wrestling with it; I think we’ve solved it.
All over New Jersey there is immense pressure on school districts and towns regarding healthcare costs, says Forrester. As a result some plans are being changed to increase the amount employees pay while reducing coverage. In contrast, Integrity’s health center is giving people access to a better program without shifting costs onto them.
“Instead of a zero-sum game, where if one person wins, another has to lose,” he explains, “Integrity Health is offering a multiple-sum game, where it is possible for all parties to win.”
Although the initial estimate was that the health center in Toms River would see about 30 people a day, the real number has been closer to 50. This means that the district is probably saving about $6,000 per day, Forrester says. The clinic’s expenses, including basic pharmaceuticals, are a little over $4,000 per day. If the 50 people who came to the clinic had instead met their medical needs in alternative ways — either by going to the doctor’s office and getting lab work or going to the emergency room — the plan’s daily costs would have been $10,000. “This gives you an idea of the magnitude,” says Forrester. “I wouldn’t be surprised if over the course of a year we will be able to show a larger amount.”
Also important to employers is having all of the books open so they can see where every dollar goes, including administrative and claim costs and expenses for reimbursing the network providers who provide treatment according to carefully specified contractual conditions.
“If we break down the costs of exactly where the money is going, it allows us to make recommendations about how to deliver a better health program, given the constraints of the benefit design,” Forrester says. This does not mean a change in the benefits design or coverage, only greater efficiency.
Forrester does not see many competitors in Integrity Health’s niche. One thing that distinguishes his modus operandi is that he has pulled together all the components of health-benefits management to make it easy, one-stop shopping for the employer.
Other companies in similar businesses, he suggests, approach the issue in a more fragmented way. For example, they might process claims but not handle networks or medical management. Or they might work with networks but not provide insurance.
“We have brought all the pieces together and woven them together so we can present a whole program for the employer to have their own plan,” he says.
Forrester also distinguishes between Integrity Health and a health maintenance organization. “The nice thing about the program we’re managing is that people can go anywhere they want,” he says. “And the health center is an option for them.” By contrast, in health maintenance organizations, usually people are either limited to certain providers or must go to a central facility.
To market Integrity Health and share its philosophy with potential customers, Forrester speaks to benefit consultants and brokers, and reaches out to the public sector through booths at conventions, for example, for school board officials or the league of municipalities.
Forrester grew up in California, the youngest of five children. His biological mother died when he was four, but he says he grew up with two wonderful parents.
“My father was a neat guy,” says Forrester. “He worked his way up through the Depression and worked as a manager for Lockheed, although he never finished high school.”
In high school in Santa Clara, Forrester was an all-American water polo player and president of the student body. In 1975 he graduated from Harvard with a double major in philosophy and government.
Then he moved to the Princeton Theological Seminary, where he studied theology and politics — in particular Reinhold Neibuhr — and earned a master of divinity degree. He then married his childhood friend Andrea Howard and moved to West Windsor.
The Forresters have three children: Briana; Ryan, a musician and recent graduate of the University of the Pacific in California; and Alex, who, along with his wife, Alfa Demmellash, operates Rising Tide Capital, a 501(c)3 micro enterprise and development organization for which Doug Forrester is board chair. “They graduated from college together and threw themselves into developing a wonderful nonprofit that helps economically marginalized folks in the Jersey City area to build small businesses,” says Forrester of his son and daughter-in-law. “I’ve never seen two individuals work so hard and with such pure motives in my entire life.”
Between 1979 and 1983 Forrester served as a township committeeman in West Windsor and later its mayor. In the Kean administration he became assistant state treasurer and then served as director of the division of pensions from 1984 to 1990.
In 1990 Forrester founded BeneCard. The evolution of pharmacy benefits, he explains, began in the late 1960s when automobile manufacturers developed pharmacy discount cards. As the industry evolved, benefits managers began offering sophisticated claims processing and data collection and were able to offer substantial discounts and provide information on drug interactions to pharmacies at point of sale.
Next came mail-order pharmacies, invented to support bulk purchasing and even greater discounts. Forrester created BeneCard to bring those tools down to a mid-market level — businesses with between 50 and a couple thousand employees.
Already at BeneCard Forrester was working out the themes that would be realized fully when he created Integrity Health. BeneCard, for example, valued transparency and provided patient-protected data to employers about their employees’ claims. “The employers liked that,” says Forrester. “They didn’t usually get credible information about what their claims were because stand-alone pharmacies weren’t integrated with the medical.”
At BeneCard Forrester came to understand that prescription information had to be integrated with medical data to best serve patient needs. Without such integration, he says, about half of prescriptions, when analyzed after the fact, turned out to have been sub-optimal — either medications were wrong, dosages were incorrect, or instructions on how and at what time to take the drugs were poor.
Forrester also came to realize while at BeneCard the importance of giving people information about things that affect them. “Most people are smarter than they are given credit for,” he says. “If you give them data and tell them to talk with their physician about it, that’s a good thing.”
In 2003 Forrester and his BeneCard partner, Robert Ullman, founded Heartland Fidelity to handle risk for BeneCard clients rather than continuing to use an insurance company for this purpose.
The year prior Forrester ran for the U.S. Senate, originally against Robert Torricelli, who dropped out of the race after accusations of accepting improper gifts. While he was never prosecuted, Torricelli withdrew after he fell far behind in the polls. Although Forrester sued to stop the Democrats from replacing Torricelli within 51 days of the election, his suit failed and eventually he lost to replacement candidate, Frank Lautenberg. In 2005 Forrester ran for governor, losing out to Jon Corzine.
Forrester wonders whether the most critical issue concerning health plans is getting lost. “People have lost sight of the fact that health plans are supposed to produce health, to put people in better positions relative to health than they were in before,” he says.
Although he has no issue with reimbursement for illnesses and broken arms, he is concerned that prevention is largely ignored.
“There has been little attempt to get behind the illnesses to try to prevent them — health and wellness, early intervention, and proper screenings to head problems off at the pass,” says Forrester.
Unlike insurance companies, Forrester’s company has no financial stake in the type of care an individual receives. “We don’t have a conflict because we aren’t an insurance company — we are not taking a risk on whatever the claim numbers end up being,” he says.
What it all comes down to, in Forrester’s estimation, is that self-insured plans put employers in the driver’s seat, with all the data they need to make good decisions.
“What we are trying to do is help employers, particularly public employers, understand that they can get all the protection they thought they had before with a fully insured plan,” says Forrester, “in an environment that gives them complete control and transparency with how the plan operates.”
Integrity Health, 103 Carnegie Center, Suite 323, Princeton 08540; 609-606-7000; fax, 609-606-7008. Doug Forrester, president. www.integrityhealth.com .