A Texas-Sized ACO Takes Shape

Memorial Hermann Physician Network and Blue Cross Blue Shield of Texas are teaming up to develop an accountable care organization that will better manage the cost of care for 100,000 members.

The Lone Star state's largest insurer and Houston's largest health system are teaming up to develop a Texas-sized accountable care organization.

Blue Cross Blue Shield of Texas and Memorial Hermann Health System expect their ACO arrangement to be underway by July 2014.

The two are undertaking the effort to better manage the care for, and the cost of, the 100,000 Blues members seen by 2,000 physicians in the Memorial Hermann Physician Network, which is part of the 12-hospital Memorial Hermann Health System.

Robert Morrow, MD, medical director for BCBSTX, says the new ACO is the "logical progression" of the payment methodologies such as bundled payments and shared savings being applied throughout the healthcare industry as providers and payers make the paradigm shift from paying for procedures and volume to paying for value.

ACOs are about using data to drive and demonstrate improved patient outcomes, as well as a cost savings, Morrow says.

The Texas-sized ACO itself is a work in progress, so specific details are scarce. Both partners are experienced players in terms of adopting innovative approaches to reduce healthcare costs. Memorial Hermann already has in place an ACO relationship with Aetna and a patient-centered medical home with Humana. It also participates in the Medicare shared-savings program. All totaled the physician network has about 300,000 covered lives under these different arrangements.

Meanwhile BCBSTX has an accountable care organization with Texas Health Resources and four active PCMHs.

Still, each deal is different. So when payers and providers enter into these agreements they have to take a hard look at their roles, notes Chris Lloyd, MD, CEO of Memorial Hermann Physician Network. "How will we do care management or outreach to patients? How will we combine our strengths?"

BCBSTX and Memorial Hermann have already started the exchange of data and information. Work sessions are also being held around care management principles and patient outreach, among other topics.

Each partner brings significant strengths to the ACO with data a strong point for both. Lloyd says BCBSTX will provide claims data across the spectrum of care—inpatient, outpatient, post-acute, surgical, and primary care—that will "provide us with a lot of transparency in terms of how we are doing" in terms of outcomes and cost savings.

He says BCBSTX also has sophisticated total cost of care accounting processes that Memorial Hermann can cross check with its own data to make sure the insurer and health system are on the same page in terms of how patients should be managed.

Morrow notes that Memorial Hermann has a "long history in developing patient data, particularly in the clinical arena." It has the population and risk stratification tools in place to calculate co-morbidities to identify the individual patients most likely to need intervention through care management or coordination.

Measuring success of the ACO will probably include the usual suspects such as increased utilization of recommended preventive care and screenings, and reduced hospital readmissions. Improved management of chronic conditions such as COPD, congestive heart failure, and diabetes will also play a role.

Lloyd says the financial arrangement will be based on the total cost of care with underlying clinical and cost benchmarks. The ACO will include the commercial and Medicare Advantage lines of business.

The multi-year contract will run at least three years, which Lloyd says is the time it takes to begin to manage the cost trajectory. Typically the first year of an ACO costs the most because of the amount of diagnoses taking place. Cost reduction begins to appear in the second or third years of an ACO.

Lloyd says the ACO arrangement is a win-win for patients and employers. "Patients like it because it's more focused on managing their health and not just caring for them on an encounter basis like when they are admitted to the hospital."

Employers are becoming more aware of ACOs and their potential to help reduce the cost of employee healthcare benefits. "When they see an accountable care network as part of the benefit design they are selecting it," says Lloyd.