As healthcare purchasers of all types push for higher quality and lower costs, health plans and providers recognize they can achieve desired outcomes by working together to design new payment models and share data.

At a Glance
Effective collaborations between payers and providers require:

  • Input from both sides on the design of new payment and care delivery models
  • Data sharing
  • A sense of trust

Payers and providers across the country are partnering to deliver value, spurred in part by employers that are frustrated by the fast pace of rising healthcare costs. These two groups—which, frankly, have not always shared the same priorities—are coming together to test new models that change how care is paid for and how it is delivered. Perhaps, for the first time, payers and providers are willing to admit they need each other.

“Providers need payers to work with them to develop new models of care that put incentives in the right place,” says James Landman, director, thought leadership initiatives for HFMA. “And payers need to work with providers to ensure the care delivery changes they would like to see are incorporated into these revised financial structures.”

HFMA’s Value Project research has uncovered a few key models for payer-provider collaborations. These include:

  • Shared savings models, such as accountable care organizations (ACOs), which can offer rewards (upside) and/or risk (downside)
  • Bundled payments, which pay providers one payment for all services associated with an episode of care
  • Reference pricing, in which providers agree to offer services at a fee that does not exceed a set price
  • Care management fees, in which the health plan pays providers organized as patient-centered medical homes for better care coordination

What makes these collaborative models different from managed care experiments in the 1990s is that quality is taking a leading role in the development of incentives for providers, Landman says. “There is an expectation that quality will not suffer through participation in new models for care delivery and payment, and if it does, that means a particular model is not working.” Collaborations today also are built on much richer data than were available just a decade ago.

With the emphasis on enhanced quality and better data sharing, several partnerships between payers and providers have already demonstrated success. Their experiences offer lessons on ways to successfully build collaborative projects between payers and providers.

Keeping Oncology Care in the Community

In early 2012, Priority Health, a not-for-profit health plan majority-owned by Spectrum Health in Grand Rapids, Mich., launched a two-year medical home pilot with five oncology practices that represent nearly half of Michigan’s oncologists in private practice.

Priority Health’s pilot program is designed to make oncologists less dependent on drug margins, rewarding them instead for the value of services they provide, says John Fox, MD, senior medical director. “If cancer care is transferred to a facility due to provider-based reimbursement structures, cancer costs increase by 20 to 30 percent,” Fox says. “So we have a vested interest in ensuring the viability of community-based oncologists.”

The program removes the financial incentive for oncologists to use more costly drugs (such as some high-cost IV chemotherapy drugs that have higher margins than lower-cost IV drugs) and pay them for better coordination of patient care. To participate in the program, oncology practices must:

  • Follow preferred chemotherapy regimens, which are evidence based and chosen by each practice to standardize care and make costs more predictable
  • Improve patient access and triage so patients can receive care sooner if they need it
  • Expand advance care planning, in which patients discuss their goals of care (quality of life, longevity, pain management) with a trained facilitator

In exchange, Priority Health pays physicians for the services they provide plus a monthly care management fee. The fee, which is calculated by a third party, is based on the provider’s margin on drugs in the previous year as well as the number of patients the provider treated and for how long. The provider receives a monthly care management fee for every patient receiving IV or oral chemotherapy in an office setting regardless of cancer type or cancer stage. The plan reimburses drugs at the physician’s acquisition cost, so there is no margin.

Exhibit 1


Exhibit 2


Priority Health worked closely with oncologists to design the methodology behind the care manage-ment fee both to ensure that the fee would be considered fair market value compensation and so that the amount would be enough to cover the costs of managing their practices, says Mary Anne Jones, CFO. 

“Part of the beauty of this program is that we have simplified the administration of the payment process so it doesn’t become highly cumbersome,” Jones says. “We wanted to take away some of the barriers to more complex payment models, such as bundled payments.” Priority Health pays the care management fee prospectively so that the practices do not have to bill for it. The fee is not subject to the patients’ deductible, coinsurance, or copayment.

Each practice in the pilot also receives an infrastructure fee of $1,500 per physician per year for the first two years of the pilot. “Changing the DNA of a practice and how it operates requires development funds,” Fox says. For example, one practice has used the infrastructure fee to help offset the cost of hiring a project manager to oversee the medical home project.

The pilot also includes a shared savings component, which physicians are eligible to receive at the end of each year if they meet certain performance measurements, including reduced emergency department (ED) visits and hospital visits. So far, the oncologists have significantly reduced ED visits—from 1.23 per patient per year in 2011 to 0.93 per patient per year in 2012 (a 24 percent reduction). However, reducing hospital visits has been more difficult in the first year of the program because some conditions that cancer patients develop, such as febrile neutropenia (a high fever and a reduction in white blood cells), have no alternatives, Fox says. Additionally, complex cancer patients often have other comorbidities, such as respiratory disease and diabetes.

Hematologist/oncologist Kurt Neumann, MD, FACP, helped Priority Health develop its oncology medical home while working with two healthcare consulting firms, ION Solutions and PRM of Michigan. He says one of the keys to building trust between payers and providers was developing a detailed operational manual for the oncology medical homes that clearly outlined the performance metrics. “Even something as simple as ED visits per chemotherapy patient needed to be well defined so that we all were speaking the same language,” Neumann says.

Besides the need to build trust, another issue that payers and providers must address is how to make these models sustainable over time, Jones says. “It is challenging for physicians to have a payment system that is a one-off from what they are getting from other payers,” she says. For this reason, leaders at Priority Health are working with other organizations to make the oncology medical home model a common practice across the specialty.

Priority Health is also expanding care management fees to primary care. The payer recently joined the Michigan Primary Care Transformation (MiPCT) project, another value-based payment model that will rely on patient-centered medical homes to improve quality and reduce costs of primary care. The program’s goals include aligning physician incentives, improving management of chronic conditions, and reducing ED visits and readmissions.

Better Coordination to Drive Value

In 2008, Bloomfield, Conn.-based Cigna launched “a shared savings program with a twist” with providers that have a strong primary care focus. Similar to Priority Health’s oncology medical home, Cigna’s Collaborative Accountable Care initiative pays primary care providers a monthly care management fee, or what Cigna calls a care coordination fee. What’s different is that the care coordination fee is based on an estimate of what the expected shared savings would be for the upcoming year. For example, a physician practice or a physician-hospital organization can receive a higher payment the following year if it reduces its total medical costs by at least 2 percent compared with a comparison group and still meets its quality targets.

Eighty-five to 90 percent of Cigna’s commercial business is self-funded, meaning employers set aside funds to pay claims rather than paying a premium as they would under a fully insured plan. “Our clients are willing to reward healthcare professionals who improve both quality and affordability of care, but they are not willing to simply add more money to the system,” says Richard Salmon, MD, PhD, Cigna’s national medical executive for performance measurement and improvement.

Each care coordination fee is negotiated at the practice level. As part of this process, Cigna asks providers to detail four to six strategies that they will employ in the first year to improve quality and reduce the total cost of care. These strategies might include:

  • Hiring an embedded care coordinator—typically a registered nurse—who will help patients with chronic illnesses manage their health
  • Expanding office hours to lower ED visits
  • Referring patients to Cigna’s preferred specialists based on their higher quality and lower costs of care (Cigna Care Designation)
  • Developing guidelines for enhancing oversight of MRIs and CT scans

Cigna and the provider will agree on a care coordination fee for the first year. At the end of a year, Cigna reviews the quality metrics and total medical cost trends for the provider compared with the rest of the market after a careful case-mix adjustment, Salmon says. 

Consider this illustrative example: A multispecialty group begins with a $1.50 per-member-per-month care coordination fee in its first year. After a year, the group shows a 2 percent medical cost trend, compared with a 4 percent trend for the market. That 2 percent might equate to a $6.00 per-member-per-month fee on the commercial side. If the group performs well on its quality metrics, it can receive up to half of that savings, which are applied to next year’s care coordination fee. In this case, the group’s care coordination fee would increase from $1.50 per member per month to $4.50 per member per month ($6.00/2=$3.00+$1.50=$4.50).

Data sharing is essential for these types of payer-provider collaborations, Salmon says. “Medical practices that are trying to reduce utilization and improve quality without access to trend data are like pilots flying without a navigation system,” he says. For this reason, Cigna shares two types of reports with providers in the program. 

Each quarter, Cigna sends out aggregate provider performance reports based on claims data. For example, a report for a large primary care practice would list key quality and financial metrics for the entire practice, subgroups of the practice (for example, physicians at different practice sites), and for each individual physician. On the quality side, the report lists metrics that are similar to Healthcare Effectiveness Data and Information Set (HEDIS) measures and primarily reflect preventive care measures like mammograms, colorectal cancer screenings, and the like. On the utilization side, the report lists total medical costs for the provider and as well as cost by category (hospital, outpatient, and professional services). The report also looks at inpatient admission rates, readmission rates, and ED visits. Providers also can review the costs associated with ED visits for minor illnesses, which suggest opportunities to provide services in their offices. The report also lists some imaging costs and use of specialty care both in and outside the group.

Cigna also sends providers daily reports on high-risk patients who might fall through the cracks, including those in the hospital and those with severe illnesses. Many organizations have hired embedded care coordinators to reach out to these high-risk patients. The care coordinators, who receive training from Cigna, help patients book appointments with specialists, reconcile medications, and schedule necessary tests. They also work closely with Cigna case managers to help patients access the health plan’s disease management tools and other support programs.

So far, Cigna’s Collaborative Accountable Care program has been adopted by 66 practices in 26 states. One of those practices is Holston Medical Group (HMG), Kingsport, Tenn. HMG joined Cigna’s program in 2010 and has since signed value-based contracts with other payers as well. The multispecialty group serves approximately 11,000 Cigna members throughout northeastern Tennessee and southwestern Virginia. Over the past three years, the practice has demonstrated significant improvements in its quality and financial metrics, according to Wendy Oberdick, MD, one of the nearly 150 providers in the practice. During CY12, HMG posted inpatient per-member-per-month costs that were $9.10 less than its market-based comparison group, and outpatient per-member-per-month costs that were $14.70 less than market. For other medical services, HMG’s per-member-per-month costs were $9.88 less than their comparison group. But the practice has not been skimping on care, and its professional services costs have increased as it tries to better manage high-risk patients, who are stratified by illness.

“Part of our mindset has been to strategically dedicate resources for these patients and provide their care in house, so our professional spend is actually up—but the overall total medical spend is significantly decreased,” Oberdick says. On the quality side, HMG’s efforts have helped bring its patients’ risk scores below those of the comparison group. The practice also has seen improvements on key metrics for respiratory patients in its population. Thanks to better care coordination, the practice has achieved a 100 percent compliance rate on three key metrics for patients with chronic obstructive pulmonary disease.

Among the practice changes that HMG has implemented include the establishment of an extensivist clinic at one of its urgent care centers. Staffed by hospitalists and RNs, the clinic offers patients a better option than heading to the ED, says Alan Meade, PT, ScD, MPH, director of rehabilitation services and value-based operations. “We have seen very good data and information coming back, and caregivers, as well as family members, are excited that their loved ones don’t have to return to the hospital.”

Down the road, Cigna may migrate its Collaborative Accountable Care model from upside only to downside and upside, Salmon says. But first, Cigna would like providers to gain more experience coordinating care in their populations. 

“The fundamental difference between this type of care coordination and the way in which the HMO population was managed 25 years ago is that customers can go wherever they want to go, and providers have to learn how to influence customers’ decisions by providing extraordinary service,” he says.

Lessons Learned

As payer-provider partnerships emerge as a competitive strategy for providing better value, payers and providers should consider the following keys to effective collaboration.

Have a common purpose. For example, Priority Health and providers in its pilot program share the same bedrock goal: keeping office-based oncologists in the community.

Develop the metrics and rewards together. Priority Health relied on input from oncologists to develop the medical home concept, including helping set realistic performance expectations. An operational manual was created to ensure that the metrics were well understood on both sides.

Develop a strong sense of trust between partners. Being transparent with data and using a third party to validate care management fees can help build bridges with providers. 

Be willing to share data. Cigna and other payers have a vast repository of claims data that extends beyond the data available through many electronic health record systems. By sharing quarterly performance data, providers can better understand trends and implement changes. To be actionable, reports on high-risk patients should be shared daily or as “real time” as possible.

Pass the value to the purchaser. One of the tenets of HFMA’s Value Project is that value must be viewed from the purchaser’s perspective. Payer-provider collaborations should focus on reducing the total cost of care to the purchaser while maintaining or improving the quality of patient outcomes.

Reward high-value providers with increased market share. Providers that can deliver cost-effective care want to see payers help drive greater market share for their efforts.

Make sure your organization’s appetite for risk matches its capacity for risk. Under collaborative models, a primary goal is to reduce inpatient readmissions and unnecessary utilization. As volume drops, finance leaders should develop a plan to ensure that value-based payments can provide enough of a cushion as inpatient volume decreases.

Laura Ramos Hegwer is a freelance healthcare writer based in Lake Bluff, Ill., and a member of HFMA’s First Illinois Chapter.


Ready to Collaborate 

Leaders at Mountain States Health Alliance (MSHA) believe that integration is critical for effective collaborations with commercial and government payers. Since 2011, the 13- hospital system based in Johnson City, Tenn., has made several changes to move from a loose portfolio of assets to a more tightly integrated system with all the tools for managing population health. And leaders want payers to know the organization is open for business.

MSHA is the majority owner of Integrated Solutions Health Network (ISHN), a regional health solutions company. Through ISHN, the system has created a self-funded insurance plan and its own Medicare Advantage plan. In 2012, it also created an ACO called AnewCare Collaborative, which began serving 17,000 Medicare patients through the Medicare Shared Savings Program (MSSP) this past July.

The ACO has partnered with approximately 400 employed and 400 independent physicians on a shared savings program. “We have established an upside for these physicians when we hit quality metrics and achieve savings,” says Marvin Eichorn, senior vice president and CFO of the health system and CFO for ISHN. “We won’t know our MSSP numbers until later this year, but we are hopeful we can share savings with physicians.”

To prepare for value-based payment, the system has made significant investments in technology that allow for better data sharing, including a health information exchange linking employed and independent physicians. MSHA has also invested in informatics and data analytics tools to help the system identify health status and utilization rates by region so they can tailor their approaches to specific populations. These tools will also help the system take deeper dives into payer claims data and will add to the system’s ability to do the upfront financial modeling that can determine the success or failure of such partnerships. Through ISHN, the system also is rewarding providers for better coordination of care; they provide a per-member-per-month care management fee to primary care practices that have received designation as patient-centered medical homes.

Eichorn believes the system’s new infrastructure will make them attractive to payers who want to collaborate on value-based payment. “We designed a payer-agnostic model that would allow us to put in place a variety of arrangements with commercial payers, Medicare Advantage plans, or the government, which we have already done with our ACO,” Eichorn says. “We want to work with payers who want to work with us to achieve the Triple Aim.”

Moving forward, one of the value-based payment collaborations that the system is exploring is Medicare’s new Bundled Payments for Care Improvement (BPCI) initiative. The program includes four BPCI options that provide fixed payments to cover the cost of all services given to a patient (for example, all inpatient acute care, physician services, and any 30-day readmissions). Eichorn says the system will make its final decision on participating in the next few months. If the system joins the BPCI initiative, they would choose a model that would provide shared savings with physicians.

Publication Date: Tuesday, October 01, 2013

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