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Monday, 28 May 2012 18:50

Trinity, Blue Cross agree to performance pay model

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Trinity, Blue Cross agree to performance pay model PHOTO: T.J. Hamilton
WEST MICHIGAN — Rarely does a hospital CEO welcome the opportunity to have fewer beds filled with patients and perform fewer diagnostic tests. 

It seems counter to one's business interests. Yet Roger Spoelman is outright excited about that prospect occurring under a new deal with Blue Cross Blue Shield of Michigan that bases payments to hospitals and doctors on how well they do their jobs — including keeping people out of the hospital.

"It incentivizes us as a system to promote (patients) receiving care in the most appropriate setting," said Spoelman, the CEO of Mercy Health Partners and the top West Michigan-based executive for parent company Trinity Health. "What we're going to be incentivized to do is keep people out of the hospital — to be 'unpatients' — and to be excited (about) having empty hospitals and putting people in the more appropriate setting and the more cost-effective setting."

Trinity Health this month signed a new "performance-based" participating agreement with Blue Cross Blue Shield of Michigan that covers its 12 hospitals across the state that serve patients in 31 counties, including Mercy Health Partners in Muskegon and Saint Mary's Health Care in Grand Rapids.

The contract represents a major change that's just beginning across the country in how doctors and hospitals are paid and moves the health care industry away from the traditional fee-for-service model that reimburses care providers for the procedures they perform.

Performance-based participating agreements are designed to improve the coordination of care for patients as they move through the system and to better manage patients' health, particularly those with high-cost conditions such as asthma or diabetes. Basing reimbursements on outcomes aims to raise quality and control costs by financially rewarding hospitals and doctors with higher reimbursement payments.

"It aligns the metrics," said Susan Barkell, senior vice president for health care value at Blue Cross Blue Shield of Michigan.

The main premise of performance-based contracts, Barkell said, "is encouraging all parts of the delivery system to work together."

"We pay all this money in this country for health care — more than any other country — but our outcomes are not as good," she said. "You're going to be able to play in this space in a much better way and, ultimately, it's going to benefit what we're all in this business for — and that's the patient."

Trinity willingly embraced the concept and approached Blue Cross Blue Shield about a performance-based contract, Spoelman said. Trinity sees the Blue Cross Blue Shield of Michigan deal as a potential model for its 37 other hospitals around the nation to negotiate participating agreements, he said.

"We realize that the present structure is unsustainable," Spoelman said.

Part of the reason for that is the number of unnecessary or redundant diagnostic tests that are performed as patients get referred between care settings or from one physician to another, even within the same health system. Through a performance-based contract, doctors and hospitals are rewarded for breaking down the communications barriers that lead to redundancies and waste.

Blue Cross is "having conversations" with other health systems and hopes to sign additional agreements this year, Barkell said. The Trinity Health contract comes after earlier deals with St. John's Health System in Detroit and Royal Oak-based Beaumont Hospital.

The insurer wants to make "significant inroads" in three to five years in securing more performance-based contracts across Michigan and will push the change "as hard as we can, especially as we see the outcomes increase and the result of all of this effort," Barkell said.

Yet Barkell knows that getting some health systems to sign on won't come easily.

"We still have to have a lot of conversations. When you're talking about changing the structure of what they've always had, it's going to be fraught with, 'Oh, my goodness: You're telling me I'm not going to get more for doing more. Instead I'm going to get more for maybe doing less and it's going to be based on these outcomes metrics?'" she said. "There are all kinds of challenges that come along with that different mindset. It's a change process that is really critical for all of us to get our arms around because otherwise we're not going to solve this problem."

Still, the Trinity Health participating agreement could help sway other health systems that a performance-based contract is something they should embrace, or at least consider, Barkell said.

"It provides us with the broader reach, which sends a really positive message," she said.

Under their new deal, Blue Cross will pay Trinity's hospitals and their medical staffs for the first three years to develop plans to smooth out and improve care coordination across their local networks. The hospitals and doctors, working with Blue Cross, will establish quality metrics to meet to earn higher reimbursements.

To aid that process, Blue Cross will provide funding to bring the physician and hospital components together "by bridging some of the infrastructure gaps so that they can speak more together," Barkell said. "What this does is encourage the alignment and communication so that everyone understands and knows who's doing what to what patient.

"This provides the impetus for them and the financial reward for them to really focus in on it."

The push to negotiate performance-based participating agreements comes after Blue Cross Blue Shield's experience with similar arrangements with thousands of physicians in Michigan. The insurer says the effort has generated improved quality and avoided millions in costs over the years.

In one example, Blue Cross says that it saved more than $27.8 million over 18 months through "the appropriate use of high- and low-tech radiology services." Another initiative to improve surgical quality saved $85.9 million statewide over two years by reducing complications.

Blue Cross is now ready to extend the lessons learned from the Physician Group Incentive Program to full health systems, Barkell said. The effort comes amid what she calls "a real sense of urgency, not only in this state but in this country, relative to the affordability issue that we all have."

"We've got momentum on that (physician) side. Now, bringing in the hospital component is really the means to the end, which is better being able to manage the population," she said. "If we are better able to manage costs from the total system perspective, everyone wins because health care is much more affordable."

How much a hospital or health system can earn in corresponding increases in reimbursement payments "really depends on the effort that they put into it and the areas of opportunity that they identify," Barkell said.

"It can be as much as they put into it or as little as they put into it, but I think the sense of urgency that is being created by them is going to drive it as much as the dollars will drive it, so it can be a significant piece of their reimbursement," she said.

At Blue Cross rival Priority Health, incentives for doctors and hospitals to improve performance make up about 15 percent of the total reimbursement payout in 2011. In some instances, incentives totaled nearly 30 percent of an individual care provider's reimbursement from Priority Health, said COO Mike Koziara.

Priority Health paid $24 million in incentives in 2011 to more than 2,000 doctors and has long balanced performance-based reimbursements to drive improved outcomes with a fee-for-service model. A typical contract with Priority Health also includes payments for care providers to improve their infrastructure to better communicate between providers and improve the quality of care.

Priority Health has steadily grown the incentive programs for years and is now accelerating the effort.

"Every year we evolve and every year we try to move more compensation to payments for outcomes," Koziara said.

Performance-based contracts are "potentially the only way we will change the way health care is delivered and provide sustainable affordability," he said.

Likewise, the Michigan Health & Hospital Association views performance-based contracts as a way to drive efficiency and quality higher, said Peter Shonfeld, senior vice president for policy and data services.

Hospitals that generate the best outcomes and reduce overutilization deserve better compensation from insurers, Shonfeld said. Repeated studies have shown "there are services that are duplicative and perhaps didn't need to be provided" under the fee-for-service model.

Blue Cross and Trinity are also reducing the natural tensions that commonly occur whenever hospitals and health insurers negotiate. A performance-based contract at least puts both sides in the same corner with the same goals, Spoelman said.

"The old days of fighting are done. This is so much better. It's so much more collaborative," he said. "We've got a much better chance now, going forward, with sharing in the savings. And that's the way it should be, I believe, because then our focus is on keeping people out of the hospital."

Read 1958 times Last modified on Thursday, 02 August 2012 16:46
Mark Sanchez

Senior Writer

msanchez@mibiz.com

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