Generative artificial intelligence (AI) has the potential to transform the healthcare industry. Keck noted that there will be a lot of disruption — which can be good, bad, and uncomfortable.

The good: Ultimately, generative AI is only as good as the data that powers it. The Blues have a powerful healthcare data asset to leverage and now have an even greater incentive to share data across the system to build longitudinal member records and power "next best action," or even "next best clinical program" decision support.

Blue Cross and Blue Shield Association (BCBSA) must ensure its approach to generative AI complements the work each plan is doing to optimize efficiencies — whether in administrative, care navigation, or clinical tasks. Democratizing this technology will ensure that any Blues plan, regardless of size, has access to the data and capabilities it needs to be competitive.

The bad: Thinking about the AI "revolution" at a macro level, Keck worries that the healthcare industry will revolutionize vertically as opposed to horizontally. She's concerned that organizations will mainly use AI to make clinical and administrative improvements in individual silos, "supercharging" the incentive structures that drive inefficiency.

The uncomfortable: For Keck, the "uncomfortable" side of generative AI falls into two categories. First, she underscores the challenges associated with figuring out how to put safeguards in place to mitigate patient harm and reputational risk.

The second category is financing. In the long run, using AI to remove the "low-hanging fruit" from clinical inefficiencies or clinical diagnoses will be both beneficial and cost-efficient. The challenge lies with figuring out how to financially manage these changes in the short run — something Keck acknowledges the industry as a whole is not yet set up to do.

Earlier this year, BCBSA published a compilation of strategies that could save a collective $767 billion in healthcare costs over the next decade. What stood out about the piece was its refreshing candor and unapologetic declaratives, in addition to the level of tactical specificity. It addressed ways to reduce drug spend, like fixing the patent thicket and the 12-year biologic exclusivity, but also non-drug savings like advancing site-neutrality.  

"We've been talking about how unaffordable healthcare is forever," Keck said. "It's time — past time, actually — to get serious about improving affordability."

To help improve affordability, BCBSA is taking positions that drive solutions to the affordability crisis. The organization hired an economist who used to work at the Congressional Budget Office to evaluate the financial impact of work that had long been sitting as draft legislation or on the cutting room floor. Their goal is to drive meaningful dialogue and support passage of legislation that will help address the affordability crisis.

Will new weight loss drugs be a catalyst for driving affordability?

With the growing obesity epidemic in America — projected to affect 50% of adults in the United States by 2030 — demand for effective weight-loss interventions has skyrocketed. As evidenced by clinical trials that continue to find GLP-1s cut the risk of cardiovascular morbidities and mortality, GLP-1s are a beacon of hope in the treatment of obesity and associated chronic diseases.

However, affordability — for patients and payers — remains an unsolved problem when it comes to these drugs. Treating just 10% of Medicare beneficiaries with obesity would raise spending by $27 billion per year. The Institute for Clinical and Economic Review (ICER) has said that even with benefits like improved cardiovascular health, the price tags for GLP-1 drugs should be 70% lower than they are.

Unfortunately, that recommendation hasn't gained as much traction as Keck expected. "If we're concerned about access, the fundamental question is about making this affordable," she noted.

Affordability issues are not unique to GLP-1s. To effectively address the affordability crisis, Keck thinks our country needs a completely new financing structure. And she believes the emergence of new weight-loss drugs will be a catalyst for change.

"If we think about the long-term impacts, we have to ask ourselves — from employers to payers and even providers — how do we do things fundamentally differently?" Keck said.

Keck said, "the amount of money we spend supporting the big three PBMs is not trivial. We want best-in-breed capabilities; we also want a more transparent pharmacy model that makes drugs more affordable for our members."

According to Keck, this is directly relevant to the work BCBSA is advancing with programs like the Synergie Medication Collaborative, which launched earlier this year.

The goal of Synergie is to creatively leverage the Blues' national reach to reduce the burden of high-cost drugs. For example, for select cell and gene therapies, the Blues are creating pooled risk models that will allow them to share financial risk across Blues plans. Through these models, the Blues can also help drive clinical quality improvement by sharing clinical outcomes data and best practices among Blues plans and their provider partners.

Blue Shield of California's plans to diversify its pharmacy business away from CVS is also a play to improve affordability and transparency, and it's one Keck welcomes as a catalyst for the rest of the Blues.

Keck says that BCBSA is looking at the bigger picture surrounding the Blues' $80 billion spend on drugs and saying, "Let's disrupt that. Let's get scale here."

Despite the headwinds in the Medicare Advantage (MA) market  —  a decidedly more adversarial tone, stingy rate increases, RADV, etc. — Keck sees an opportunity for the Blues to pick up momentum in MA.

Many Blues plans are relatively new to the MA market, and the Blues collectively have just 14% MA market share (versus 28% for UnitedHealthcare* and 18% for Humana). But MA has become a significant focus for BCBSA, and Keck noted that the Blues' goals for entering MA may enable them to succeed.

"Our definition of success in MA might be different than that of some of the big national players," she said. The Blues are focused "on addressing comorbidities and social needs, supporting a holistic approach to care delivery…enhanced by data and technology." She added, "Our competitors have pursued maximizing risk adjustment as an MA strategy  —  and have in many ways reaped the benefits of doing so." But with regulatory changes minimizing the impacts of risk adjustment, plans that were reliant on the legacy model for their margin had a difficult year in MA.

Over the last decade, there has been a massive shift in the managed care organization (MCO) space. We've seen the vertical integration of well-capitalized, publicly traded MCOs.

Overall, the Blues have not pursued this same vertical integration strategy. While they do have some form of ownership over physicians or clinics in 24 states, the Blues have largely focused their efforts on working to enable providers — often keeping them independent — rather than pursuing ownership.

Keck says this strategy is in line with the Blues' mission to impact lives at scale. "Our hypothesis is that by doubling down on enablement, we can help lift the entire market rather than picking a single clinic for our members to visit," Keck said. "If we focus on improving key capabilities — enabling team-based care with wraparound services, data analytic reporting, etc. — broadly within a market, I think we can have a significant impact."

Keck also posited that "enablement [may be] the key that allows the Blues to extend from the commercial population to MA," by allowing them to create a commercial risk model that is more translatable to MA.

The years-long antitrust suit against BCBSA has finally come to resolution with a $2.67 billion settlement. Since then, there has seemed to be an increase in strategic tie-ups among Blues (e.g., Elevance-Blue Cross Blue Shield (BCBS) Louisiana, BCBS Vermont and BCBS Michigan).

Keck doesn't necessarily view this as a harbinger of things to come, though. Instead, she says: "The driver of the horizontal consolidation  —  which I would call 'affiliation'  —  goes back to the same question I asked when I took over BCBSA two years ago: How do the Blues build on our superpower — our deep local focus — and  achieve scale?"

She believes it's possible to have both. The question the Blues have to grapple with is: Do they have to have full horizontal consolidation to achieve scale, or can they achieve it by building and sharing a common set of capabilities across the association? "It's the same undercurrent to how we think about vertical integration, MA, high-cost drugs, and AI."

*Advisory Board is a subsidiary of UnitedHealth Group, the parent company of UnitedHealthcare. All Advisory Board research, expert perspectives, and recommendations remain independent.

This interview was edited by Abby Burns.

For more insights on Eric Larsen's conversations with BCBSA CEO Kim Keck, read Part I and II of the interview: