North Carolina’s biggest health insurer, which typically clashes with hospitals over payments, is now teaming up with five of the state’s larger health care systems in an effort to put the brakes on runaway costs.
Blue Cross and Blue Shield of North Carolina will coordinate the effort, called Blue Premier. The model rewards doctors and hospitals for the value provided to patients, not for the volume of work performed. At the same time, the providers will also be on the hook financially for any cost overruns, along with Blue Cross. The idea is to provide an incentive for the medical providers to be more efficient and less wasteful.
Patrick Conway, CEO of Blue Cross, said the providers also will be accountable for improving health outcomes and stressed that the system is not designed to save money at the expense of patients. Providers will be assessed by such measures as reducing infections, surgical complications, hospital readmissions and hospital deaths, as well as providing diagnostic screenings for cancer, diabetes and other conditions to identify problems early.
The participating hospitals are WakeMed Health & Hospitals, UNC Health Care and Duke University Health System, all of which have multiple facilities in the Triangle. Also participating are Cone Health in Greensboro and Wake Forest Baptist Health in Winston-Salem. Conway said that Blue Cross is in discussions with the remaining major hospital chains, including Atrium Heath in Charlotte, Vidant Health in Greenville, and Novant Health in Winston-Salem.
About half of Blue Cross’s 3.8 million customers in the state are expected to be in the new model by next year, including 500,000 in the Triangle and the Triad.
Conway said the goal is to bring down health care cost increases to close to zero percent a year. He said costs are currently increasing more than 5 percent annually on average, and noted that this year’s 4.1 percent statewide average rate cut in Affordable Care Act plans was possible only through the same type of coordination with UNC Health Care, but the strategy announced Tuesday will be on a much larger scale.
How it will work
Blue Premier is modeled on strategies increasingly being adopted by other insurers, Medicaid and Medicare, with varying degrees of success. Some have not succeeded and have been discontinued because the cost assumptions were off, or the doctors were unable to meet their targets, among other miscalculations. Such strategies, commonly called accountable care organizations, are touted as the next phase of health care in this country.
Blue Cross will perform a central function by sharing patients’ medical bills with the participating providers, which is expected to help doctors understand all the care a patient has received so unnecessary and redundant procedures can be eliminated. Providers typically can only look up a patient’s medical history within their own system, but they don’t have access to the computer networks of every doctor and urgent care clinic that patients might also be using.
Wesley Burks, the CEO of UNC Health Care, said Tuesday he had been frustrated by just such an experience this week while working in an allergy clinic as a pediatrician.
“I had the choice of ordering thousands of dollars of lab work, or waiting until they [the family] could get that information to us,” Burks said. “I didn’t have access to this information because that’s not the way these systems are set up.”
The sharing of medical claims will have another effect: It will reveal how area labs, clinics and hospitals compare on prices for similar procedures. Blue Cross can review such data internally but now the hospital systems will also be able to compare prices for patients who use more than one system.
“This level of transparency allows us to find outliers, identify the causes and to improve,” said Mark Gwynne, president of UNC Health Alliance, a network of more than 5,000 providers statewide.
Gwynne was on the UNC Health Care negotiating team during the development of the Blue Premier contract.
“If WakeMed is the lowest-cost center for X-condition, that motivates us at UNC to become the highest value,” Gwynne said in a phone interview Wednesday, the day after Blue Cross rolled out the plan. “It is a significant motivator for us to really reduce our total cost of care.”
Gwynne said the medical claims data won’t reveal the confidentially negotiated reimbursement rates between the providers and Blue Cross, but they will show the total cost of a medical “episode,” such as hospitalizing and treating a patient for a heart condition.
Benefits and concerns
This approach, if properly executed, should deliver benefits for a typical person insured by Blue Cross, said Pam Silberman, a professor of health policy at UNC Chapel Hill. She said doctors are not likely to skimp on diagnostic tests and ignore basic health care to achieve short-term financial savings, because such shortcuts could result in costly illnesses down the road.
But Silberman said the biggest concern for these strategies in general is the fate of low-income, chronically ill patients who are very challenging to manage and can run up exorbitant medical bills with frequent visits to the emergency room. For such patients, Blue Premier would deploy social workers and community health workers to arrange for transportation, schedule checkups and make sure the patients are taking their medications.
Hundreds of such programs have been adopted across the country in anticipation of the nation’s health care system moving to payments for quality rather than for quantity. One of the first was started in 2009 by Blue Cross Blue Shield in Massachusetts, which cut costs by 5.8 percent and 9.1 percent over four years by referring tests and procedures to cheaper facilities, and by reducing unnecessary tests and procedures, according to an analysis published by the New England Journal of Medicine.
Over the past decade or so, a great deal of data has been accumulated, showing which programs work and which ones don’t, Gwynne said. Medicare has been experimenting with these approaches since 2008, and one of its programs, Next Generation, was launched in 2016 when Blue Cross CEO Conway was director of the Center for Medicare and Medicaid Innovation. That program saved about $100 million in expenses in its first year, a 1.7 percent reduction on Medicare spending, according to the first annual report; the 2017 performance is still being evaluated.
Research has shown that physician groups have been able to achieve savings and health improvements in Medicare value-based programs, said UNC health policy professor Valerie Lewis, but hospital systems have struggled to achieve financial savings because their traditional business model is keeping hospital beds filled, not empty.
The specific details and terms of Blue Premier were not released because Blue Cross said the contracts, which went into effect this month, are proprietary. Next year, Blue Cross, the hospitals and doctors will have the option to begin sharing the financial risk and reward of managing patients, based on 2019 data. In 2021, the third year of Blue Premier, all parties will have to share financial risks of managing patients based on 2020 data.
Jeff James, CEO of Wilmington Health, a group of 175 doctors, nurse practitioners and physician assistants, said in a phone interview that Blue Premier is a much-needed attempt for containing health care costs, but there is no guarantee it will succeed for everyone.
“This is the direction health care has to go,” James said. “But we have strong concerns. The financial risk we might assume could be catastrophic to our organization.”