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Kaleida Health, the largest healthcare provider in the Western New York market, and BlueCross BlueShield of Western New York (BCBS), the region’s largest health plan, are blazing a trail that others will be expected to follow: They are lowering healthcare costs through a payer-provider partnership.
“We went into this knowing we have to find real, absolute cost reductions, and they need to be sustainable,” says Steve Swift, BCBS’s executive vice president and CFO.
Kaleida and BCBS formed a joint venture partnership called Kaleida HealthNow, Inc. that owns the new joint venture called Align. The health system and payer then recruited 500 physicians to form the Optimum Physician Alliance, an independent physician association that operates as a subsidiary of Kaleida HealthNow.
“One of the principles that we adopted at the outset is that this relationship has to be a four-way win: a win for the physicians, a win for the health system, a win for the health plan, and a win for the employers and insured members,” says Donald Boyd, senior vice president of network development and operations at Kaleida. “Otherwise, this will not be sustainable long term. That is the lens through which we do all of our work.”
Success factors include:
The plan launched in January 2013 when Kaleida and BCBS, both of which are self-insured, began offering it to their own employees. Later last year, the Blues began marketing it as a fully-insured plan to the commercial market. It is sold on New York’s public insurance exchange and will be offered on private exchanges in the future. In the first months of early enrollment on the New York exchange, about 40 percent of purchasers chose Align.
Developing an effective payer/provider relationship starts by identifying like-minded organizations in your market, Boyd says. “This is motivated by people coming together who believe that we have a responsibility to our community to build something that is going to be sustainable for the future,” he says. “If you have that as a guiding principle, it’s amazing what people can do in collaboration.”
With that perspective, payers and providers must stop arm-wrestling over unit costs and reimbursement rates, and work together to improve value, says Swift. “This is a fundamental mind shift in terms of the way we all are thinking about the business. We all must be focused on a collaborative win/win mindset as opposed to a win/lose.”
Believing that up to 30 percent of healthcare dollars are currently wasted, the partners are focused on eliminating unnecessary utilization, which would typically mean lower revenues for most specialists and health systems. However, Kaleida and the Optimum Physician Alliance expect to make up revenues with additional patients gained through the narrow network plan, which is attracting members with a lower premium and the promise of high-value providers (see the exhibit below).
The partnership moves reimbursement away from fee-for-service to pay-for-performance, with financial incentives based on physicians’ patterns of specialty referrals and generic prescriptions, their patients’ use of urgent care and the emergency department, and other metrics. Physician performance is evaluated each year to determine the provider network.
Kaleida and BCBS negotiated specific reimbursements for the Align plan. All profits created by the joint venture are shared equally by the two parties.
Boyd and Swift shared these tips on negotiating details of a narrow-network health plan:
Start with the end in mind. For Kaleida and BCBS, the goals were:
Recruit the right physicians. Kaleida and BCBS first recruited 15 independent physicians whom they knew to be value-minded to form a Physician Leadership Board.
“Forming this board was important because we wanted to hear from physicians who were independent and had choices in the marketplace,” Boyd says. “A lot of these conversations started with, ‘What are the challenges you’re facing? What ideas do you have about changing it?’”
The Physician Leadership Board is key to Align’s success because it identified the performance metrics needed to align physician incentives with those of the health system and the insurer. The Leadership Board was responsible for identifying 500 physicians—250 primary care and 250 specialists—to be in the Optimum Physician Alliance, and it is the entity that drives clinical integration. “We give them the authority and the responsibility to fulfill the set of objectives that we’ve established,” Swift says.
Those objectives are:
Collaborate. “This was a very collaborative, iterative process, whereby we met as a triumvirate of the physicians, the health plans, and the health systems to describe the different levers that we believed we could influence to deliver value to the community,” Boyd says. “And we worked to understand, quantitatively and qualitatively, how we would implement strategies that use those levers to deliver improved quality and reduced cost.”
“We met and worked regularly, team to team, for nine months,” Boyd says. The executive committee, comprised of C-level leaders, met every two weeks for two hours. In addition, payer-provider teams were assigned to develop specific aspects of the relationship, including clinical integration, legal and governance issues, the physician network, and data/analytics.
The teams shared information about each other’s operations and took part in new kinds of decisions. For example, the providers helped develop the benefit design of the new health plan.
“Historically, we would talk to customers and maybe to our broker partners to try to develop offerings that would meet their needs,” Swift says. “The thing that was really new about this is the fact that we had very explicit input from the delivery system.”
Based on early data from the health plan’s performance, Boyd is optimistic that the partnership is working as envisioned. The partners have agreed that, if any of the stakeholders are threatened financially by the arrangement, adjustments to the financial model will be made.
“There has to be an open-mindedness and willingness to try things because this is breaking new ground,” Swift says. “The recipe hasn’t been made, so there’s going to be some trial and error. We are going into this with that understanding.”
Lola Butcher is a freelance writer and editor based in Missouri.
Interviewed for this article:
Donald Boyd is senior vice president for network development and operations,
Kaleida Health, Buffalo, N.Y.
Stephen Swift is executive vice president and CFO, HealthNow New York Inc., the parent of BlueCross BlueShield of Western New York, Buffalo. BlueCross BlueShield of Western New York, a division of HealthNow New York Inc., is an independent licensee of the BlueCross BlueShield Association.
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Publication Date: Tuesday, January 28, 2014
In this Business Profile, Bruce Haupt, president and CEO of ClearBalance, discusses how a patient loan program can increase patient collections, reduce bad debt, and speed cash flow.
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.
In this Business Profile, Jerry Bruno, principal with Deloitte Consulting LLP, discusses the importance of choosing revenue cycle solutions that help an organization meet the challenges of a quickly evolving healthcare environment.
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.
In this business profile, Lane Jackson, a partner in the Grant Thornton LLP Health Care Advisory Services practice, with extensive experience in overseeing system implementations and revenue cycle reorganizations, discusses best practices for elevating revenue cycle performance during an EMR implementation. Grant Thornton LLP is a sponsor of the Large System Controllers Council Affinity Group.
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.
In this business profile, Amy Gross, senior vice president of Key Government Finance, discusses the benefits of private placement transactions to support large-scale financing projects.
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.
In this business profile, Doug Polasky, executive vice president at Xtend Healthcare, explains the importance of having sound workflow processes in a consolidated business office to ensure optimal performance and reduce costs.
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.
In this business profile, sponsored by SSI, Jay Colfer, vice president of sales and marketing, shares how patient access solutions are reversing the trend toward increased bad debt resulting from the rise in high-deductible consumer health plans.
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.
In this business profile of Deloitte Consulting, Matthew Hitch and David Betts explore the potential benefits of elevating the customer experience and outline strategies to change service delivery.
With the ICD10 deadline quickly approaching and daily responsibilities not slowing down, final preparations for October 1 require strategic prioritization and laser focus.
TriMedx helps health systems control costs and uncover savings opportunities by optimizing the clinical engineering function.
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.
A leader from McKesson discusses how healthcare reform is forcing hospitals and health systems to take a different approach to capacity management and patient flow.
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.
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.
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.
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.
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.
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.
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.
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 (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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
From payment incentives to value-based purchasing penalties, the national focus in healthcare is on improving patient care and lowering costs. Coordinating care for patients as they move from one care setting to another can help meet these goals, but the greatest success will come when the patients healthcare providers work together. By enhancing a team approach to care and providing cost efficiencies, partnerships between acute and post-acute settings benefit patients and the healthcare providers taking care of those patients.
Physician practices must improve organizational efficiency to compete in this era of reduced reimbursement and escalating administrative costs.
Many healthcare organizations are pursuing next-generation health information systems solutions. Learn more about Navigant's work with University of Michigan Health System.
Copyright 2016, Healthcare Financial Management Association.
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