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Where Value-Based Purchasing is Still Nascent

Philip Betbeze, for HealthLeaders Media, June 20, 2014

HLM: Is it realistic to have a payer of your own?

Schnieders: That's a complicated question, and is tied in with developing our clinically integrated network. As we've been talking about establishing that clinically integrated network in Kearney, we'll also have a chapter in Grand Island, Lincoln, and Omaha.

Doctors here were concerned that a CIN would focus only on narrow networks. We did tell them we would be experimenting with narrow networks with our own covered lives only. The narrower network reduces variation, utilization and costs, and thus reduces premium.

They understand, as long as it's just our covered lives. Through that, we'll start tracking quality data. Primary care doctors know who the bad actors are. It'll be their peers deciding who's quality or not. Our new data registry that CHI has will show Dr. Smith and his 2,000 patients, and it can show how many have diabetes or other chronic conditions, and will show the ones, for example, who haven't seen an ophthalmologist in three years.

All the evidence-based data measures is in black and white, and we didn't have this before. Now it's very objective vs. subjective. We purchased a Medicare Advantage product and have bought into an actual commercial insurance company. So we're moving on the path of being an insurance product. In the near future, we could have a sizable presence and a product on the exchanges.


Philip Betbeze is senior leadership editor with HealthLeaders Media.
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2 comments on "Where Value-Based Purchasing is Still Nascent"


Bob Sigmond (6/23/2014 at 2:45 PM)
In my earlier comment, the "INVALID" word is "create" or "set up" Any reactions? Right on! Bob

Bob Sigmond (6/23/2014 at 11:43 AM)
Another approach that Michael Schneider might consider for moving from volume to value with a single payer to the hospital, calls for no immediate change in how all sources of income make their payments. Michael should [INVALID] a subsidiary [independent of the hospitals he manages] to [1] take over the entire billing and collection processes and staff from the hospitals, and [2] guarantee to pay each hospital a monthly check, based on the total income projected in an annual collaborative budget for the forthcoming year. An amount equal to the projected budgeted income would be paid to the new subsidiary in advance of each month. This single payer innovation would maintain [for the time being] the processes of charging all sources of payment for the hospital's services on the basis of fees-for-service or existing contracts, but not paying any hospital any money on the basis of fees- for-service. This single payer approach is like a dream come true for those managing hospitals who can effectively manage an annual budget: [1] no more uncompensated care patients since all are paid for, [2] no more worries about annual deficits, [3] no more unpleasant dealing with difficult third party payers and patients, [4] no more anti-social incentives that always go with being paid on the basis of fee-for-service. Also, with this change, it is much easier for Mr. Schnieder to increase the efficiency of the collection processes and reduce the cost of collections while probably increasing the amount of collections. Finally, this approach involves no change whatsoever in relation to the marketplace, as nothing changes for third party payers or patients or any other sources of income. This new arrangement depends on a level of trust between the hospital and the new subsidiary, based on a carefully designed contract between the two collaborating entities which Mr. Schneider controls. This contract should include creation of a jointly managed fund that receives all the money that is included in the hospital annual budgets for projected income. At the end of each year, the amount of any negative net income is paid to the new subsidiary and any positive net income remains in the fund for protection in future years, or is used for collaborative capital expenditures by the contracting hospital. Representatives of the two collaborating entities should meet monthly to review budget results and to make immediate adjustments in the budget, when necessary. Does anyone see any reason why this arrangement would not work very well, with a single payer to the hospital no longer paying any fees-for-service, while it is being paid as usual from multiple sources of income? For more information, contact me at 215-561-5730 or bob@sigmond.us