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How Payers and Healthcare Providers are Making Peace

News  |  By Christopher Cheney  
   May 24, 2016

Despite a legacy of mistrust, leading organizations are working together and building trust by using benchmarking, bundling, and aligning their interests.

This article first appeared in the May 2016 issue of HealthLeaders magazine.

After decades of fee-for-service-fueled adversarial relations, healthcare providers and payers are learning how to work together cooperatively.

One blooming partnership between a prominent payer and physician groups is rooted in New Jersey.

"We see relationships with providers now that are nothing like anything we have seen in managed care before," says Lili Brillstein, director for episodes of care for Horizon Healthcare Innovations, a division of Newark-based Horizon Blue Cross Blue Shield of New Jersey. "We are so proud of what we have been able to accomplish."

In 2014, Horizon posted total revenue at $9.5 billion and capital reserves at $2.5 billion. The health plan serves about 3.8 million members.

As of February 2016, Horizon says it had more than 900 physicians participating in episodes of care programs for several medical conditions and procedures: hip and knee replacements; knee arthroscopy; coronary artery bypass grafting (CABG); maternity; hysterectomy; colonoscopy; breast, lung, and colon cancer; and congestive heart failure.

Other episodes of care are slated to be operational before the end of this year for conditions including Crohn's disease, lower back pain, and prostate cancer.

Excluding chronic-condition episodes of care such as heart failure, 8,400 Horizon beneficiaries completed a bundled-payment episode in 2014, with that figure rising to about 11,000 in 2015, Brillstein says, noting the health plan's target for this year is 16,000 completed episodes.

The main financial drivers of Horizon's successful growth strategy for the nonprofit health plan's episodes of care programs are retrospective performance benchmarking and an upside-only risk model, she says. "Providers get earned savings without downside risk."

"When you know someone and they know you, then you can understand what the challenges are on the other side."

Brillstein explains that Horizon's retrospective performance benchmarking is based on two years of historical data. In addition, the health plan's benchmarking process not only weeds out outliers to set realistic spending averages for physicians but also accounts for a practice's level of cost efficiency to avoid punishing doctors who spend healthcare dollars wisely, she says.

"We need to start where our providers are: High-cost providers wouldn't come into the program," she says, adding Horizon "simulates the episode" to ensure providers have an expectation of earning shared savings payments. The health plan also sets lenient performance benchmarks for extraordinarily lean physician practices, Brillstein says. "We don't want to punish the guys who are actually doing the right thing."

Stephen Zabinski, MD, an orthopedic surgeon at Somers Point–based Shore Orthopaedic University Associates, says Horizon's approach to performance benchmarking is attractive to most physician practices. "We now have a collaborative relationship between the payer and the doctors," he says.

Horizon has built all of the health plan's episodes of care with active participation from physicians at the earliest stage of a bundled-payment program's development, Zabinski says. "This started with us being part of a physician panel On setting up bundled payments for hip and knee replacement. That's a lesson from the sandbox. When you know someone and they know you, then you can understand what the challenges are on the other side."

Alignment of patient, provider, and payer interests is another prime factor driving the rapid growth of Horizon's episodes of care programs, he says, noting all of the parties have a shared interest in driving down costs for joint-replacement procedures. "Complications are the biggest driver of extra costs of care. When you cut down complications, it's great for the patients."

Horizon tracks customer satisfaction in all episodes of care, and joint replacement scores consistently post in the 90th percentile, Zabinski says.

John "Jack" Feltz, MD, president and CEO and practicing obstetrician and gynecologist at Morristown, New Jersey–based Lifeline Medical Associates, started participating in Horizon's maternity episode of care in 2014. "It allowed us to look at things the same way," he says of the health plan and his physician practice. "We are sharing information, which gives the provider point of view and the payer point of view. This is a patient-centered project rather than an organization-centered project. … The first thing is to align our missions: the best affordable healthcare possible. We have to have mutual respect for what each other's roles are and what each other's needs are."

Horizon understands the importance of bolstering the financial performance of the health plan's physician partners, Feltz says. "When you pay peanuts, you get monkeys."

Lifeline Medical serves 400,000 patients, with a provider staff featuring 90 doctors and 25 nurse practitioners. In 2014, 3,500 mothers received medical services through the Horizon bundled-payment program, and the practice expects to complete 4,000 of the episodes this year, he says.

Bundling the payments for all physicians involved in an episode of care also fosters physician alignment. Feltz says the standard obstetrician bill under the fee-for-service model accounts for about 20% of the cost, with other cost centers—such as laboratories and hospitals—sending out the other 80% of the bill. "This is a totally different way of thinking from five years ago, never mind 20 years ago. Historically, from the obstetrician's perspective, it didn't matter how much all that other care costs."

Physicians adopt a more global view of patient care when they participate in bundled payment contracts, Brillstein says. "There is collaboration across the care continuum. It allows them to see bigger."

Communication critical for provider-payer cooperation
Halfway across the country, Dallas-based Baylor Scott & White Health is investing resources and C-suite executive time in building cooperative relationships with the market's primary payers.

Since 2008, BSWH has been involved in a broad-based effort to communicate and cooperate with the primary commercial payers in central and northern Texas, including Blue Cross and Blue Shield of Texas, Cigna, Humana, and United HealthCare, says Gary Brock, executive vice president and chief integrated delivery network officer at BSWH. "We've been at this for quite some time," he says.

BSWH is an integrated health system featuring 48 hospitals and a health plan business unit that serves more than 290,000 members. For the fiscal year ending June 30, 2015, BSWH posted total operating revenue at $7.5 billion.

Quarterly meetings of the C-suite leadership teams from the payers and BSWH are the essential element of the outreach effort, Brock says of the catered luncheons. "They all know each other. This allows them to come onto neutral ground."

On the payer side, representatives at the quarterly meetings feature CEOs and chief medical officers. The BSWH representatives include President and CEO Joel Allison, CFO Fred Savelsbergh, Senior Vice President of Managed Care Dianne Grussendorf, and Brock. "There's nothing off the table, and the key people are in the room to deal with that," Brock says.

Discussion topics BSWH officials bring to the quarterly meetings are often related to growth and other strategic objectives such as patient-centered medical home development, technology investments, and legislative agendas, Grussendorf says.

The payers are always eager to talk about the annual "report cards" BSWH produces for all of the integrated health system's commercial payer partners, she says. Report card grading is based on several metrics, including contract performance measures such as claim denial rates and billing cycle timelines. "It tends to lead the operational meetings because the health plans are concerned about their performance," Grussendorf says of the report cards, which are partially blind to block carriers from gaining access to sensitive data at specific competitors.

In addition to the quarterly meetings, Grussendorf says she supervises production of a bimonthly newsletter that BSWH shares with its commercial payer partners. The newsletters, which generally focus on one topic in a single-page document, highlight research, medical services, and awards that demonstrate BSWH's commitment to provide high-quality care at low cost.

A sample of the newsletters drawn from 2012 to 2015 features a variety of topics: Baylor Research Institute's attempt to develop a blood-based test to detect colon cancer; BSWH's efforts to reduce medically inappropriate percutaneous coronary interventions; and Baylor University Medical Center's participation in research that found genomic sequencing beneficial in determining targeted therapies for metastatic triple-negative breast cancer, one of the most deadly forms of the disease.

Robust and regular communication with payers can generate direct financial benefits, Brock says, recalling the impact of a palliative care presentation during one of BSWH's quarterly meetings with commercial payers. The presentation by Robert L. Fine, MD, a BSWH palliative care specialist, was so impressive to the top executives of one managed care organization that they arranged to make a donation to support palliative care at the integrated health system.

Changing hearts and minds
To overcome their adversarial past, providers and payers need to do more than communicate and have aligned interests; they need to change their collective mindsets.

Horizon officials are drawing predictably befuddled inquiries from across the country about how the health plan has achieved amicable relations with hundreds of physicians in one of the highest-cost healthcare markets in the country, Brillstein says. "People ask me, 'Where's the stick?' But there is no stick. The goal is not to smack them but to work collaboratively to achieve success in the value-based model."

The top executives at New Jersey's Blue Cross Blue Shield affiliate have proven in words and deeds that they prefer cooperation over conflict, Feltz says. "Horizon's leadership recognizes that nobody wins a war when you battle—the casualties just go higher."

One of the challenges blocking widespread cooperation between providers and payers is the variable readiness for value-based care models at commercial payers, the OB-GYN specialist says, drawing an analogy from the Star Trek entertainment franchise. Just as civilizations on different planets in the Star Trek universe exist at variable stages of development, healthcare payers are at variable stages of preparedness for alternative payment models such as episodes of care, Feltz says.

"The different carriers are in different stages of evolution in value-based care," he says. "Contracting based on value needs to be universal across all payers in the same way it is for providers."

To make value-based contracts work effectively, physicians need to make the leap of faith that payers are trustworthy partners, Zabinski says. "Many doctors have a fee-for-service mentality that the insurers are the enemy. I hear it all the time: 'The government is out to get us. The insurers are out to get us.' "

BSWH is working hard to establish mutual respect and tight bonds with the major commercial payers in Texas, Brock says. "We're not out to take advantage of them. I don't want to be a doormat to be walked on, and I don't want them to be a doormat, either. … At the end of the day, it's all about trust and relationships."

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Christopher Cheney is the CMO editor at HealthLeaders.

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