News: CJ Exclusives

Conway out at Blue Cross; mega-deal with West Coast Blue pending

The chief executive officer of Blue Cross N.C. has resigned amid charges of drunken driving and misdemeanor child abuse.

Dr. Patrick Conway was arrested in June after he sideswiped a truck driving on Interstate 85. His two young daughters were in the back of the car. The BlueCross N.C. Board of Trustees asked Conway for his resignation Wednesday, and he accepted. 

“BlueCross N.C. is committed to doing business with honesty, integrity and fairness. The details that recently emerged related to Dr. Conway’s arrest depict behavior that falls short of our standards,” the insurer said in a statement. “Despite Dr. Conway’s many successes during his tenure at BlueCross N.C., we feel that our constituents are best served by naming an interim CEO and beginning a formal search for a permanent replacement.”

A police report says Conway drove erratically for more than 90 miles along I-85. He refused to take a breathalyzer test, and he could not compete sobriety tests without swaying and stumbling. 

According to the report, Conway was “absolutely belligerent” when taken to jail. Officers wrote that Conway cursed at them, threatening to get them into trouble with Gov. Roy Cooper and demanding to be released.

The board said it was unaware of the notes from the arresting officers.

Conway’s departure has imperiled one of the more ambitious health care deals of the year. Conway had planned an affiliation between Blue Cross N.C. and the Pacific coast Blues plan Cambia Health Solutions. 

The move would be unprecedented. Linking two Blues of such size and across such distance was daring, even in today’s flurry of mergers in health care. Together, the two Blues would comprise a $16 billion enterprise covering 7 million people across five states. 

The affiliation would have launched Conway into national prominence. He would have taken over as the CEO of Cambia Health Solutions, as well as holding onto his role as the CEO of Blue Cross N.C.

But after a video surfaced that showed Conway weaving for miles before crashing into an 18-wheeler, Cambia began pulling back. The company distanced itself from Conway, saying it was “deeply troubled by the emerging details of the situation.” As it put the deal on hold, Cambia stressed how “transparency and integrity of leadership are imperative to Cambia.”

Even so, Cambia seemed reluctant to give up on the affiliation. 

“The merits of the Strategic Affiliation are sound and built on a shared strategic vision to make health care better, simpler and more affordable for individuals and their families,” the company said in a statement. 

Any deal would have to clear N.C. Insurance Commissioner Mike Causey, who had called for Conway’s resignation. Causey said he would shoot down any deal so long as Conway remained CEO. 

Causey could not force the company to fire Conway, but by opposing any affiliation led by Conway, he gave Blue Cross N.C. a choice between its CEO and a multi-billion-dollar deal. 

“Until they get this situation with the CEO resolved, I see no path forward for the deal under the current CEO. They failed to disclose to me what they had an obligation to disclose,” Causey said. 

Further complicating matters, Conway had been essential to the deal. 

Before the crash, Conway was the industry’s golden child. Among the health community, he had cultivated a reputation as a “small-town doctor from Texas” and family man, who valued his faith and his four children. Just weeks ago, he was speaking at a Health Affairs conference in Washington, D.C.

And Conway wasn’t your average health insurance CEO. He was the first practicing physician to head a Blues plan — and the first physician to lead a plan of such scope. 

He was one of the so-called stars of the Obama era: he held two directorships at the Center for Medicaid and Medicare Innovation, where he shaped the health care of more than 100 million people. At Blue Cross N.C., he hatched an ambitious plan to move providers over to value-based care — a new payment model aimed at paying for value instead of services. 

Insurers and providers have been switching to value-based care since the Affordable Care Act became law. Advocates sold it as a way to reduce the cost of health care by creating new incentives. Under the model, physicians share insurers’ risk: They earn more if patients remain healthier, and lose money if patients’ health declines. 

In most places where value-based care has been implemented, providers have been rewarded only when patients’ health improved. Conway was one of the few who added teeth to the model, strengthening his reputation as an innovator. 

“The deal hinged on Conway being the CEO of the proposed new partnership,” John Locke Foundation analyst Jordan Roberts said. “Conway has a history in the Innovation Office at CMS, and BCBSNC has been at the forefront of innovative new payment models in N.C.”

Causey said that before he learned of the arrest, the deal with Cambia was “moving along.” But after Conway’s arrest, he accused Blue Cross N.C. of breaking his trust and covering up Conway’s legal troubles. 

“We hope that this action begins to rebuild a trusting relationship with our regulators and customers,” BCBSNC said in a press release. 

Chief Operating Officer Gerald Petkau will step in as interim CEO. For now, the future of the deal between Blue Cross N.C. and Cambia Health Solutions remains on hold. 

“It depends,” Causey said. “We’ll see how this comes out, how the court case comes out, and what happens with the leadership’s decisions on what to do with the CEO.”