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Premera Blue Cross builds new payment model rooted in FFS

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Zepeda, April
Tuesday, June 12, 2012
Premera Blue Cross builds new payment model rooted in FFS
June 11, 2012 | Chris Anderson, Senior Editor
Healthcare Finance News

MOUNTLAKE TERRACE, WA – While payers across the country have launched a host of different forms of payment initiatives like ACOs and patient-centered medical homes, designed around some form of risk sharing, Washington-based Premera Blue Cross has found success via its unique payment model it calls Global Outcomes Contracting.
 
Even though the contracting model from Premera still has fee-for-service at its core, it does provide incentives for participating practices both to decrease the overall cost of care of its patient population while also meeting predetermined quality standards. But instead of the upfront payments to practices that are common in PCMH models, Premera bases future FFS unit cost payment increases on how effectively the practice has achieved the quality metrics and reduced the cost trend of its patient population compared to the cost trend of all its members not attributed to the program.

The result, said Rich Maturi, senior vice president of healthcare delivery systems at Premera, is that the individual practices have the latitude to decide for themselves how to derive savings from their own patient populations.

“The practices don’t have to redesign radically the way (they) do healthcare initially,” Maturi added, “but they can go after the sickest patients and the clearest opportunities to eliminate unnecessary and wasteful utilization.”

While the program has been nearly five years in the making, it has now reached what the company believes is critical mass. After its most recent contracts under the program, it now bases payments on the Global Outcomes Contracting model for 12 major physician groups and an independent physician association, which comprise more than 100,000 Premera members, or roughly one-fourth of all its members who have an attributable primary care physician.

Two of the earliest participants were The Everett Clinic, Everett, Wash. and Seattle-based The Polyclinic, both of which began operating under the payment model in 2010. Now with two years of data in hand, Premera says both groups were able to reduce the cost trend between 3 percent and 5 percent per year, which has generated savings of $1.2 million and $2 million respectively.

“Under the current fee-for-service payment model, providers receive a fee for each test or procedure. Not surprisingly, this payment system encourages overuse and drives up costs,” said Rick Cooper, CEO of The Everett Clinic, in a prepared statement. “With the outcomes payment model however, providers are being rewarded for keeping patients healthy though prevention, care coordination and disease management.”

The benefit of keeping the Global Outcomes Contracting rooted in the fee-for-service model is twofold, according to Maturi. Since its existing contracts with providers are based on the fee-for-service model, it allows the insurer to roll out the program without the need to renegotiate contracts. Second, by allowing providers to determine where the savings can be found within their individual practices, it lets them gradually change the care models as they see fit to slowly wean themselves from the FFS payment model.

As Michael Tronolone, MD, chief medical officer of The Polyclinic noted: “Changing reimbursement from a pure fee-for-service system to one based on performance… gives us a chance to finance care process improvements. The fact that we were successful now allows us to fund further innovation.”

While the early results are encouraging, Maturi is clear that the program is only now beginning to reach maturity.

“In terms of the arrangements, we’ve arrived at scale. On the other hand, this is the beginning after five years of evolution,” he said. “Now we will see what happens as a result of the providers learning to find the low hanging fruit and us learning to share data and the providers beginning to share information about what works.”