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Reform in the Trenches

Philip Betbeze, for HealthLeaders Media, June 13, 2012
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Starting small
Typical of such contracts, this one represents a small portion of the book of business for both Hoag and Greater Newport. Blue Shield is about 12%–15% of the total commercial business for Greater Newport, while Greater Newport's admissions account for about a third of Hoag's book of business. Both believe that despite the relatively small number of patients the contract covers, its structure will help transform care patterns at both organizations to deliver more value to all patients, mainly because care protocols and interventions developed from the agreement will apply to all patients, not just those covered under the contract. Afable and Puzarne say the Blue Shield deal will provide essential information necessary to better structure such contracts in the future so they won't put an undue burden on the hospital or physicians to manage vastly different variables under multiple risk contracts. That's one reason it's not obvious to employees which patients are covered under the Blue Shield plan. 

"There is nothing on the membership card that shows you are an ACO member," Puzarne says. "That's important because we don't want them to feel they're being treated differently either positively or negatively. But it's also important because this is about re-engineering processes for our employer groups and their employees to drive member behavior and improve value."

No such contract is complete without appropriate allocation of risk, say both Afable and Puzarne, which is why so much time at the negotiating table was spent on the matter, and so little on price or patient volume, for example.

"We all knew the costs and drivers, which made for more thoughtful and less adversarial negotiations," says Puzarne, who adds that the contract is unlike so-called pay-for-performance programs chiefly because of the downside risk allocated to the hospital and IPA. The contract allocates "bands" of risk, he says, to the parties who have the most accountability for that particular portion of the patient's care.

"We have several bands of risk, including pharmacy, inpatient care, and ED visits, and we put weights on those based on who has more responsibility," Puzarne says.

For example, areas where costs can be saved include redirecting outpatient surgery to lower-cost freestanding centers, focusing on generic prescription drug usage, reducing C-sections, reducing ER utilization, and developing a program for high-risk diabetes patients. 

One would expect such contracts to engender high overhead expense to manage patients more closely, but Puzarne says while "there is a certain amount of additional structure required," neither Hoag nor Greater Newport expects to see much of an increase in overhead.

"Where we are primarily making additional investment is in the area of project management, which we normally don't have with insurance contracts," Puzarne says. "You won't see additional real dollars spent directly related to this contract, but you will see additional management time to ensure the success of the ACO."

Also, the partners have built a governance structure that does not exist with standard contracts in the form of a steering committee with representatives from each organization. Branching off of that committee are intervention subcommittees, which are at the care level.

Afable, for his part, doesn't see this contract in a vacuum. He and his leadership team will continue to try to pursue more of them while the Blue Shield contract runs its course.

"It's likely we'll do additional pilots concurrent with this one, only because to do something for three years and wait to see how it works out will put us behind," he says. "We have to be more nimble in a shorter time frame."

Personally, he is interested in beginning to segment population health interventions.

"An example could be programs for the frail elderly," he says. "As a geriatrician, I have a particular interest, but the most important element is the individual participant. They have to be part of this equation as well. This is where the learning comes from. The more specific the patient population, the better incentives, motivations, and results can be managed."

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