A California health system, payer, and physician group developed a risk-sharing agreement that holds them jointly responsible for hitting cost-saving targets—and allows them to share any savings above that target.
California-based Dignity Health is committed to universal access to health care—and sees its pioneering partnership with Blue Shield of California and Hill Physicians Medical Group as central to its mission. Increasing access requires that healthcare costs be brought to heel, and that is why the partnership was formed. “If we care about our nation and its economic health, we need to be part of the solution,” says Dignity Health CFO Michael Blaszyk. The solution began to emerge in 2007 when California Public Employees Retirement System (CalPERS), one of the nation’s largest healthcare purchasers, made it clear to Blue Shield and Dignity that costs were becoming unsustainable. Both Dignity Health and Hill Physicians, which is the largest independent physicians association in California with more than 3,500 physicians and caregivers, had contracts with Blue Shield. So the CEOs and other senior leaders of the three organizations started searching for a new way of delivering and paying for medical care. The result: One of the first accountable care organizations (ACOs) in the nation. Launched in January 2010, the pilot ACO serves 41,000 CalPERS beneficiaries in the Sacramento, Calif., area who are enrolled in a Blue Shield HMO. By the end of 2011, the partnership had saved CalPERS a total of $37 million compared to what it would have paid without the ACO. In addition, the three partners had split $13 million, courtesy of the shared-savings contract, according to a September 2012 article in Health Affairs. “We are convinced that these types of three-legged stool partnerships with doctors, hospitals, and health plans are the way to go,” says Juan Davila, executive vice president for health care quality and affordability at Blue Shield. “We don’t think the quality is better and waste is reduced—we know. And the relationships are better. Everybody is still making money and winning.”
The term “accountable care” was barely in use in 2007 when the three partners hammered out the basic ACO model that many other healthcare partnerships are currently adapting for their own use. The partners started with a dual quality and cost agenda. They set a per-member-per-month global budget that required the three partners to collectively reduce costs by at least $15 million in 2010. However, they also agreed to maintain or improve the quality of health care provided: The partnership agreement stipulates that no cost-control initiative can be launched if it would hurt quality. The partners developed a risk-sharing agreement that holds them jointly responsible for hitting cost-saving targets—and allows them to share any savings above that target. To reduce their costs, the partners agreed to pursue five strategies:
A “cost of healthcare” team—composed of clinical, finance, data analytics, and other staff members from the three organizations—was assigned to implement those strategies. For example, the team developed a more proactive hospital discharge planning process. Within 48 hours of a patient’s admission, a summary of each patient’s essential medical issues is prepared, along with a post-discharge needs assessment. The team also redesigned patient education to help patients and family members better understand self-care instructions after discharge. The team’s efforts helped reduce the ACO’s 30-day all-cause readmission rate by 15 percent in one year. In addition to reducing readmissions in the first year, the partners also reduced inpatient admissions and total hospital days by 15 percent each. As a result, they reduced costs by $20 million, surpassing their first-year savings goal by $5 million.
The ACO strategy is working out so well for the three partners that they are all pursuing it in other markets. The three organizations teamed up again to create an ACO for city and county employees in San Francisco. In addition, Hill Physicians Medical Group is pursuing another ACO in another city, and Blue Shield expects to have 20 contracts signed by late 2014. Should other providers follow suit? “I would like to just say, ‘Go ahead and do it—everything will work out fine,’ but I truly believe that unless you get the fundamentals right, it will be doomed. And the fundamentals are aligned incentives,” says Rosaleen Derington, chief medical services officer for Hill Physicians. Before the partners could align incentives, they had to understand how each of them made a profit. That required financial transparency, which did not come naturally. “Historically, we all fight about money, and one party wins only if the other party loses,” Davila says. “We had to get past that and start trusting each other.” Blue Shield started by revealing how much it expected to pay Dignity Health and Hill Physicians over a year’s time, and how that influenced the premium price it charged to CalPERS. Dignity Health and Hill Physicians followed Blue Shield’s lead by showing how they made a profit in their contracts with insurers. That allowed the partners to identify opportunities for delivering care more efficiently. “Once you lay all the cards on the table, others can see what you’re driving at and can help you drive there,” Davila says. For example, reducing hospital use was essential to lowering costs across the ACO—but Dignity Health had to have revenue sources to make up for the lost inpatient days. So Blue Shield worked to ensure that patients who sought outpatient or emergency care out of network were redirected to Dignity Health facilities. Meanwhile, because the organizations were so different, they could not assume financial risk equally. The CFOs of each organization were tasked with figuring out how to spread risk across the partners based on their ability to influence costs in a particular area. “You can imagine the shift in the CFOs’ thinking process—to not try and grab as much as they could for their own organizations,” Derington says. “Getting through that signaled a major shift in our respective relationships and how we go about our business.”
The ACO leaders who were interviewed for this article said the shift in their relationship required new ways of interacting, including the following. Relinquish oversight when appropriate. Under the traditional payer/provider dynamic, Blue Shield used to monitor the care that its patients received in the hospital. As an ACO partner, that should not be necessary, says Derington of Hills Physicians. “We said: ‘Hey, trust us to take care of that member. We’re in a different relationship. You don’t have to look over our shoulder to ensure that we’re doing the right job.’” Forget the past. The biggest barrier to success, says Blue Shield’s Davila, is “folks who bring up stuff that isn’t germane to today: ‘X years ago you said this, and it wasn’t true,’ or ‘You did this, and it wasn’t fair.’” Know yourself. Understand what your organization contributes to the partnership. In a risk-sharing partnership, that means detailed cost and quality data. “If you don’t truly know what your quality outcomes are—and if you don’t have a good cost accounting system to understand how much it is costing to deliver care and the variation among the different providers—then you’re going to have a difficult time when you get into the partnership,” says Dignity Health’s Blaszyk. Assign the right employees. All three ACO participants found that some of their staff members were unable to adopt the collegial mindset required in a partnership. “As we started to change work processes deep into the organization, we had to change out some of our leadership,” Derington says. “Some people come to collaboration and partnership very easily, and some don’t.” Use consultants strategically. A consultant facilitated the early discussions between the CEOs of Dignity Health, Hill Physicians, and Blue Shield but bowed out after the ACO vision was established. Davila compares their role to that of architects. “They can help you with what it looks like, but that same architect isn’t the guy that picks up the hammer and starts putting the house together,” he says. “We have to be the guys that take the hammer and the saw and put the house together piece by piece.”
In any healthcare partnership, the biggest challenge is replacing a competitive and perhaps adversarial relationship with one built on mutual trust. All three partners in the pilot ACO had worked together for many years and shared a mutual respect for one another’s expertise. However, their working dynamic had been one of “every man for himself.” The ACO is governed by a board of directors comprising CEOs and other top executives from each partner organization. This high-level leadership signals to staff members within each organization that they can pursue strategies that are good for the ACO, even if they are not always financially advantageous for a given partner. “In many ways, we are making it up as we go along because there has not been a sharing of data systems and economics like this heretofore,” Blaszyk says. “We have to be sure to do this in such a way that we can learn from our early experience, translate that learning to continuous improvement, and do this in a way that all partners share in the benefits.” It is a new way of thinking that other healthcare organizations must learn. “This is so very, very different than how we operated before,” Derington says. “We are basically all in it together, and we all make money or lose money based on the initiatives that we put in place and our success on those initiatives.”
Lola Butcher is a freelance writer and editor based in Missouri. Interviewed for this article: Michael D. Blaszyk is senior executive vice president, chief corporate officer and CFO for Dignity Health, San Francisco. Juan Davila is executive vice president for health care quality and affordability, Blue Shield of California, San Francisco. Rosaleen Derington is chief medical services officer, Hill Physicians Medical Group, San Ramon, Calif.
Ontario Systems: Maximizing Self Pay Collections
The Claro Group: Helping Hospitals and Healthcare Systems Improve the Bottom Line
Deloitte: Helping Organizations Navigate MACRA
ClearBalance: Boosting Patient Payment through Consumer-Friendly Loan Programs
Deloitte Consulting LLP: Employing Innovative Solutions to Optimize Revenue Cycle Performance
Grant Thornton LLP: Maintaining and Improving Collections During an EMR Implementation
6 Patient Revenue Cycle Metrics You Should Be Tracking (and How to Improve Your Results)
Patient financial engagement is more challenging than ever – and more critical. With patient responsibility as a percentage of revenue on the rise, providers have seen their billing-related costs and accounts receivable levels increase. If increasing collection yield and reducing costs are a priority for your organization, the metrics outlined in this presentation will provide the framework you need to understand what’s working and what’s not, in order to guide your overall patient financial engagement initiatives and optimize results.
10 Ways to Reduce Patient Statement Volume (and Reduce Costs)
No two patients are the same. Each has a very personal healthcare experience, and each has distinct financial needs and preferences that have an impact on how, when and if they chose to pay their healthcare bill. It’s no longer effective to apply static billing techniques to solve the complex challenge of collecting balances from patients. The need to tailor financial conversations and payment options to individual needs and preferences is critical. This presentation provides 10 recommendations that will not only help you improve payment performance through a more tailored approach, but take control of rising collection costs.
Reduce Patient Balances Sent to Collection Agencies: Approaching New Problems with New Approaches
This white paper, written by Apex Vice President of Solutions and Services, Carrie Romandine, discusses the importance of patient segmentation and messaging specifically related to the patient revenue cycle. Applying strategic messaging that is tailored to each patient type will not only better educate consumers on payment options specific to their billing needs, but it will maximize the amount collected before sending to collections. Further, targeted messaging should be applied across all points of patient interaction (i.e. point of service, customer service, patient statements) and analyzed regularly for maximized results.
The Future of Online Patient Billing Portals
This white paper, written by Apex President Patrick Maurer, discusses methods to increase patient adoption of online payments. Providers are now seeking ways to incrementally collect more payments due from patients as well as speeding up the rate of collections. This white paper shows why patient-centric approaches to online payment portals are important complements to traditional provider-centric approaches.
Payment Portals Can Improve Self-Pay Collections and Support Meaningful Use
Increased electronic engagement between healthcare providers and patients provides significant opportunities for improving revenue cycle metrics and encouraging patients to access EHRs. This article, written by Apex Founder and CEO Brian Kueppers, explores a number of strategies to create synergy between patient billing, online payment portals and electronic health record (EHR) software to realize a high ROI in speed to payment, patient satisfaction and portal adoption for meaningful use.
Large Health System Drives 10% UP (Patient Payments) and 10% DOWN (Billing-related Costs)
Faced with a rising tide of bad debt, a large Southeastern healthcare system was seeing a sharp decline in net patient revenues. The need to improve collections was dire. By integrating critical tools and processes, the health system was able to increase online payments and improve its financial position. Taking a holistic approach increased overall collection yield by 10% while costs came down because the number of statements sent to patients fell by 10%, which equated to a $1.3M annualized improvement in patient cash over a six-month period. This case study explains how.
ICD-10: Managing Performance
With the ICD10 deadline quickly approaching and daily responsibilities not slowing down, final preparations for October 1 require strategic prioritization and laser focus.
Clarity Drives Collections
Read how Gwinnett Medical Center provides clear connections to financial information, offers multiple payment options for patients, and gives onsite staff the ability to collect payments at multiple points throughout the care process.
Orlando Health Gains Insight into Denials, Reduces A/R Days with RelayAnalytics Acuity
Read how Orlando Health was able to perform deeper dives into claims data to help the health system see claim rejections more quickly–even on the front end–and reduce A/R days.
Revenue Cycle Payment Clarity
To maintain fiscal fitness and boost patient satisfaction and loyalty, healthcare providers need visibility into when and how much they will be paid–by whom–and the ability to better navigate obstacles to payment. They need payment clarity. This whitepaper illuminates this concept that is winning fans at forward-thinking hospitals.
Streamlining the Patient Billing Process
Financial services staff are always looking for ways to improve the verification, billing and collections processes, and Munson Healthcare is no different. Read about how they streamlined the billing process to produce cleaner bills on the front end and helped financial services staff collect more than $1 million in additional upfront annual revenue in one year.
Wallace Thomson Hospital Automates to Maximize Limited Resources
Effective revenue cycle management can be a challenge for any hospital, but for smaller providers it is even tougher. Read how Wallace Thomson identified unreimbursed procedures, streamlined claims management, and improved its ability to determine charity eligibility.
7 Steps for Building and Funding Sustainability Projects
Before launching an energy-efficiency initiative, it’s important to build a solid business case and understand the funding options and potential incentives that are available. Healthcare leaders should consider taking the steps outlined in the whitepaper to ease the process of gaining approval, piloting, implementing, and supporting sustainability projects. You will find that investing in sustainability and energy efficiency helps hospitals add cash to their bottom line. Discover how hospitals and health systems have various options for funding energy-efficient and renewable-energy initiatives, depending on their current financial structure and strategy.
Key Capital Considerations for Mergers and Acquisitions
Health care is a dynamic mergers and acquisitions market with numerous hospitals and health systems contemplating or pursuing formal arrangements with other entities. These relationships often pose a strategic benefit, such as enhancing competencies across the continuum, facilitating economies of scale, or giving the participants a competitive advantage in a crowded market. Underpinning any profitable acquisition is a robust capital planning strategy that ensures an organization reserves sufficient funds and efficiently onboards partners that advance the enterprise mission and values.
Key Capital Considerations for Mergers and Acquisitions
The success of healthcare mergers, acquisitions, and other affiliations is predicated in part on available capital, and the need for and sources of funding are considerations present throughout the partnering process, from choosing a partner to evaluating an arrangement’s capital needs to selecting an integration model to finding the right money source to finance the deal. This whitepaper offers several strategies that health system leaders have used to assess and manage capital needs for their growing networks.
Trend Watch: Providers adapt as value-based care moves from hype to reality
Announcements from several commercial payers and the Centers for Medicare and Medicaid Services (CMS) early in 2015 around increased efforts to form value-based contracts with providers seemed to point to an impending rise in risk-based contracting. Rather than wait for disruption from the outside in, health care providers are now making inroads on collaborating with payers on various risk-based contracting models to increase the value of health care from within.
Yuma Regional Medical Center case study
Yuma Regional Medical Center (YRMC) is a not-for-profit hospital serving a population of roughly 200,000 in Yuma and the surrounding communities.
Before becoming a ZirMed client, Yuma was attempting to manually monitor hundreds of thousands of charges which led to significant charge capture leakage. Learn how Yuma & ZirMed worked together to address underlying collections issues at the front end, thus increasing Yuma’s overall bottom line.
Reforming with a New 50-Bed Acute Care Facility
Kindred Hospital Rehabilitation Services works with partners to audit the market and the facility’s role in that market to identify opportunities for improvement. This approach leads to successes; Kindred’s clinical rehab and management expertise complements our partners’ strengths. Every facility and challenge is unique, and requires a full objective analysis.
5-Minute Briefing on Revenue Integrity Through HIM WhitePaper Hospitals FS
As the critical link between patient care and reimbursement, health information enables more complete and accurate revenue capture. This 5-Minute White Paper Briefing shares how to achieve cost-effective revenue integrity by your optimizing HIM systems.
5-Minute Briefing on Accelerating Cash Flow Through HIM WhitePaper Hospitals FS
Speedier cash flow starts with better CDI and coding. This 5-Minute White Paper Briefing explains how providers can improve vital measures of technical and business performance to accelerate cash flow.
5-Minute Briefing on Reducing the Cost of RCM WhitePaper Hospitals FS
Qualified coders are getting harder to come by, and even the most seasoned professional can struggle with the complexity of ICD-10. This 5-Minute White Paper Briefing explains how partnerships can help improve coding and other key RCM operations potentially at a cost savings.
Providers Focus Too Much On Revenue Cycle Management
The point of managing your revenue cycle isn’t just to improve revenue and cash flow. It’s to do those things effectively by consistently following best practices— while spending as little time, money, and energy on them as possible.
Lucille Packard Children’s Hospital Stanford Case Study
How Lucile Packard Children’s Hospital Stanford increased payments received within 45 days by 20% and reduced paper submission claims by 70% by using ZirMed solutions.
Using Predictive Modeling To Detect Meaningful Correlations Across Claims Denials Data
The reasons claims are denied are so varied that managing denials can feel like chasing a thousand different tails. This situation is not surprising given that a hypothetical denial rate of just 5 percent translates to tens of thousands of denied claims per year for large hospitals—where real‐world denial rates often range from 12 to 22 percent. Read about how predictive modeling can detect meaningful correlations across claims denials data.
ZOLL and Emergency Mobile Health Care Case Study
Emergency Mobile Health Care (EMHC) was founded to be and remains an exclusively locally owned and operated emergency medical service organization; today EMHC serves a population of more than a million people in and around Memphis, answering 75,000 calls each year.
Maximizing Medicare Reimbursements White Paper
Since the Physician Quality Reporting Initiative (PQRI) introduction, CMS has paid more than $100 million in bonus payments to participants. However, these bonuses ended in 2015; providers who successfully meet the reporting requirements in 2016 will avoid the 2% negative payment adjustment in 2018, so now is the time to act! Included in this whitepaper are implications of increasing patient responsibility, collections best practices, and collections and internal control solutions.
Denials Deconstructed: Getting Your Claims Paid
Getting paid what your physician deserves—that’s the goal of every biller. Yet even for the best billers, achieving that success can be elusive when denials stand in the way of success, presenting challenges at every turn. Denials aren’t going away, but you can learn techniques to manage and even prevent them.Join practice management expert Elizabeth W. Woodcock, MBA, FACMPE, CPC, to: Discover methods to translate denial data into business intelligence to improve your bottom line, determine staff productivity benchmarks for billers, and recognize common mistakes in denial management.
Automation and Operational Improvement Drive Sustainable Results
Physician practices must improve organizational efficiency to compete in this era of reduced reimbursement and escalating administrative costs.
Revenue Cycle Management Resolves Migration Implementation Issues
Many healthcare organizations are pursuing next-generation health information systems solutions. Learn more about Navigant's work with University of Michigan Health System.
Partnering For Success – Provider Achieves Strength in Stability
The proper implementation of healthcare information technology systems is crucial to an organization’s financial health.