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BCBS + Coastal Team to Share Savings for Improved Care

Monday, March 26, 2012

 

Achieving real reform in healthcare requires three things: improved population health, a better experience for consumers, and more affordable care. While these goals are clear, how to achieve them has proved not to be. But there’s an increasing interest in payment reform as one likely answer.

Redefining the Insurer-Physician Relationship

Currently, provider contracts with insurers are “fee for service arrangements.” In other words, insurers pay physicians a discounted amount for each service they provide to the patient. The more services they provide, the more they get paid. Unfortunately, inherent in this arrangement is an incentive for sick care rather than preventative care.

“Incredibly, up to one-third of all U.S. healthcare spend is waste, meaning that it is spent on things that don’t improve people’s health, such as unnecessary hospitalizations or redundant testing,” said Peter Andruszkiewicz, president and chief executive officer at BCBSRI. “Here in Rhode Island, where our members’ medical costs totaled more than $1.3 billion last year, that’s well over $100 million annually in unnecessary medical spend.”

Shared Savings

An alternative to this approach is a “shared-savings” arrangement that rewards physicians if they improve patient outcomes and achieve financial savings ahead of what the carriers set as reimbursement. If the physicians are successful, they share in the savings, and ultimately the cost of healthcare should improve.

The concept of shared savings is catching on in contractual agreements between insurers and physicians in the state. Blue Cross & Blue Shield of Rhode Island (BCBSRI) and Coastal Medical, the state’s largest physician practice, have entered into an innovative, two-year shared-savings agreement aimed at improving healthcare quality and patient safety while slowing increases in costs. With Coastal serving 105,000 patients across 18 offices in the state, the pressure’s on for this new contractual agreement to succeed. And if it does, the hope is that the arrangement will catch on with other provider groups.

Metric Incentives

Under the terms of the contract, Coastal becomes eligible for additional financial compensation if it achieves best-in-class healthcare quality metrics established by the National Committee for Quality Assurance (NCQA) and manage the total cost of care better than the rest of BCBSRI’s primary care physician network. If it does, Coastal can share a percentage of any meaningful medical cost savings experienced by its group of patients.

“One of the biggest frustrations physicians have had under the old fee-for-service model is that they simply can’t spend as much time caring for complex patients as they would like to. This agreement realigns the financial incentives to allow Coastal’s physicians to spend more time caring for chronically ill patients. Early detection of illness, better access to care, and closer attention to the needs of chronically ill patients improves their health and creates savings for the system. Patient care then improves, doctors are rewarded for doing the right thing, and care becomes more affordable.” said Al Kurose, M.D., president and CEO of Coastal Medical.

If this new shared savings model works, it’s not just the physicians and insurers who will benefit by savings; patients will win, too.

Amy Gallagher has over 19 years of healthcare industry experience.  As Vice President at Cornerstone Group, she advises large employers on long-term cost-containment strategies, consumer-driven solutions and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, is a member of local organizations like the Rhode Island Business Group on Health, HRM-RI, SHRM, WELCOA, and the Rhode Island Business Healthcare Advisory Council, and participates in the Lieutenant Governor’s Health Benefits Exchange work group of the Health Care Reform Commission.

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