So it’s a good thing he’s familiar with the Grand Rapids-based health plan’s operations. As corporate chief financial officer and executive vice president at Spectrum Health, Freed has had financial oversight over Priority Health and served on its board of directors for 17 years. Spectrum Health is the majority owner of Priority Health, which was formed in 1992.
Freed’s familiarity should serve him well as the permanent CEO of the second-largest health plan in Michigan.
“It helps immensely. Just the knowledge of the organization and the knowledge of the business and the knowledge of the industry, I don’t have a steep learning curve,” said Freed, who recently had the “interim” tag removed from the position he moved into on May 1 when long-time CEO Kim Horn resigned.
Freed, who will continue in the dual role as corporate CFO at Spectrum Health, has 25 years of experience in health care management. He originally joined the former Butterworth Hospital in 1995 as vice president of finance and CFO.
Freed became Spectrum Health’s CFO through the 1997 merger of Butterworth and the former Blodgett Memorial Medical Center that created the health system. He was named interim CEO of Priority Health when Horn departed.
As the federal Affordable Care Act ushers in a new era for health care, Freed leads Priority Health as it prepares for what’s ahead. Come Jan. 1, 2014, small businesses and individuals can buy coverage designed for health exchanges that all states must have operating. The Affordable Care Act also expands Medicaid eligibility rules, potentially bringing thousands of more people into the system.
“The next evolution of the organization is to adapt to the health care reform that’s going on. We have to be responsive to that and will be, like any health insurer,” Freed said. “We have to be responsive to the reforms that are going on in the industry, and not the least of which is that there will be more people insured and insured differently than they have been in the past.”
Even before the federal reform law, Priority Health was moving in the direction the Affordable Care Act is taking the industry. Priority Health years ago formed a Medicaid HMO and a Medicare Advantage plan, both of which are growing. It began pushing further into the individual market with the launch two years ago of new products and formed a subsidiary several years ago to sell fully insured health policies.
The array of products positions Priority Health across all segments of coverage.
Looking to the future, Priority Health’s strategic focus “is one that we have always had and what we have reaffirmed” — providing access to quality, affordable care, Freed said.
“In particular at Priority Health, what we want to make sure that we can do is provide that affordable access to people no matter where they are and the stage of life they’re in. We will be able to insure people, in effect, from cradle to grave,” Freed said. “We expect to offer those solutions to individuals and to employers regardless of where someone is in life and whenever they need us.”
Under Horn’s 16-year tenure, Priority Health expanded geographically across all of the Lower Peninsula and grew from about 120,000 members to a peak of more than 600,000 members.
The geographic expansion and product development into growth markets such as Medicare, Medicaid and individual plans positioned Priority Health well for the future, said Allan Baumgarten, a Minneapolis-based health care consultant who analyzes HMO markets in Great Lakes states, including Michigan.
“When I think of the requirements (of the Affordable Care Act), I think of the business opportunities it creates,” Baumgarten said. “Diversity in the product line has worked well for (Priority Health), and they have correctly anticipated where the market is going. With their geographic expansion, with their product expansion and with their lines of business, they’re in a pretty good position.”
But that doesn’t mean the health plan lacks challenges, such as continuing to adapt to reforms. That includes reforms coming under the Accountable Care Act and how people will buy health coverage in the future, the changes occurring within the industry that increasingly emphasize wellness and health prevention, and making payments to care provides based on performance to get cost trends under control.
“Our biggest opportunity right now is to make a difference in value for the members that we serve,” Freed said. “There’s a great opportunity to reduce cost and a great opportunity to continue to improve outcomes. If we’re nothing else, we’re persistent. And we’ll continue to be really persistent in pursuing those two things.”
To maintain its position in the market, “we have to listen to our customers, more than anything else,” according to Freed.
“We have to be very responsive to what their needs are, and if we’re responsive, we’ll be a very successful organization,” Freed said. “What needs to continue is an emphasis on value.”
Enrollment in Priority Health’s HMO, which accounts for the largest share of its business, has been declining. HMO enrollment totaled 405,581 as of June 30, down from 423,989 a year earlier and 432,079 at the end of 2010, according to a quarterly financial report filed with state regulators.
Overall membership across all products declined to about 590,000 people.
Freed attributed the overall dip in members to economic conditions the last few years that drove up unemployment, as well as costs that led some employers to do away with employee health coverage. Priority Health has also faced increased competition in recent years from Blue Cross Blue Shield of Michigan, which has won back market share previously lost to Priority and others.
Freed doesn’t have any “an undue level of concern” over the enrollment dip. Priority will continue focusing on “growing profitably” and on the long term. The company “is not going to keep score by how many members it has this month,” he said.
“It certainly is a very competitive business. That goes without saying,” he said. “In some ways, that’s meant we’ve had to give up on some business that we previously had, but we will continue to emphasize growing in the future. We don’t have any expectations of continuing this decline, but some of the decline was probably inevitable and the result of simply the market itself. When people lose health insurance coverage, we lose members.
“We’re as competitive as anybody else. We’re going to try to grow in the future.”