Premera sees promise with new pay plan
Monday, June 11, 2012
Premera sees promise with new pay plan
Date: Friday, June 8, 2012, 3:00am PDT
Peter Neurath, Contributing Writer- Puget Sound Business Journal
As health insurers continue to experiment with the way they pay medical groups, Premera Blue Cross this week disclosed some promising results with a model it calls “global outcomes contracting.”
Premera’s global contracting is part of the trend away from the traditional payment system of fees for medical services, with its inherent financial incentive to do more rather than less. Now the direction insurers are moving, many say, is to “pay for value rather then volume.”
With its global outcomes contracts, Premera still pays fees for service, but for the past two years it has shared cost savings with a dozen major medical groups statewide based on whether medical costs for their patients were lower than regional average costs.
“We want to reward providers for producing results,” said Premera Senior Vice President Rich Maturi. “We’ve been working on this for a couple of years, and we’ve reached that point where we have some scale and are beginning to get results. And we want to give some recognition to the medical groups working with us.”
Premera claims it’s one of the first insurers nationally to try this type of payment model. Other models for changing the inefficient fee-for-service system focus only on specific cost measures, according to Premera.
Maturi said Premera’s new payment model takes this a step farther by not only examining the total cost of the patient but also incorporating quality measures. This, he said, ensures that costs are contained without a reduction in the quality of care for patients.
“This type of payment model has been discussed and piloted on a limited basis by Medicare,” Maturi said. But Premera’s global payment method “is really the first broad-scale realization of this in Washington and one of the first in the country.”
Premera CEO Gubby Barlow said the global outcomes contracting model takes a meaningful step toward addressing rising medical costs. “It’s not secret the current system is not sustainable, since costs have been rising faster than inflation and economic growth,” he said. “Everyone has a role to play in addressing this challenge.”
Major medical groups that have participated in Premera’s global contracting project include The Everett Clinic and Seattle-based Polyclinic; as well as Franciscan Medical Group, in Tacoma; the Rockwood Clinic, in Spokane; and Wenatchee Valley Medical Center, among others. Collectively, they serve nearly 100,000 Premera members.
“We believe there’s a need to transition away from the traditional fee-for-service payment system to a financing system really built more around value and paying, in different ways, for hitting the trifecta of better quality and outcomes, of better patient experience, and of decreasing the cost of care,” said Everett Clinic CEO Richard Cooper. The clinic’s five-year goal is to reduce the cost of care by 25 percent.
“The current system is broken,” Cooper said, “and we need to innovate and to redesign the care-delivery system.”
Cooper said Everett Clinic, with about 325 doctors, is exploring new payment models with other insurers as well, including Regence BlueShield, Group Health Cooperative, Humana and First Choice Health.
Premera’s global contracting entails several steps. First, the insurer identifies patients who regularly visit a given medical group, though these patients may occasionally see other doctors, and then Premera attributes them to this group.
Through the course of the year, Premera tracks the health care costs of these patients — including emergency room visits, hospitalizations and prescription drugs.
Premera then calculates the average cost of all of its members in Western Washington who are attributable to medical groups in that region. And it compares the average cost of, say, the Everett Clinic members to the average of those in Western Washington.
In so doing, though, Premera applies a “risk adjustment” in the event that Everett Clinic’s patients generally were sicker — maybe they needed more cardiac care, for instance —than the regional population.
If the average cost for Everett Clinic patients increased less than the regional average — and the clinic measured up to Premera’s quality standards — then the clinic will share in the savings by making payments.
The Everett Clinic last year produced $1.2 million in savings, and the Polyclinic $2 million. For contractual reasons, Premera remains mum about how much of these savings it shared with these medical groups.
The Polyclinc, with 180 doctors, likes the experiment. “It is a great step forward in that we are rewarded for being good stewards of the resources and still taking excellent care of our patients,” said Polyclinic CEO Lloyd David. This type of contract, he said, holds the promise of making health care less expensive than it would otherwise have been.
“Our contract with Premera has turned out to be a win-win deal,” David said. “We’ve been rewarded for lowering the total cost of care — a savings of $2 million over a one-year time period — because of the way we care for our patients.”
David said the Polyclinic is eager to strike similar agreements with other insurers. “We have experimented with a few pay-for-performance programs over the past five years with health plans, all with positive results.”