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After proving that it can thrive in
the federal government’s two-sided risk program, Henry Ford Health System, a
six-hospital system based in Detroit, is parlaying that success to contract
directly with General Motors, the nation’s largest automobile manufacturer.
Through this direct-to-employer
contract, salaried GM employees and their dependents in southeastern Michigan
were incentivized to choose GM’s “ConnectedCare: Henry Ford Health System” plan
during the 2019 open enrollment period. Those who did so could expect lower
premiums and, as long as they stayed in the Henry Ford network, lower
cost-sharing and patient-friendly amenities.
GM expects to save money relative to
the other insurance options it offers to workers, and Henry Ford intends to
meet 19 performance metrics and stay under annual total-cost targets so that it
earns shared savings—while increasing its market share.
felt like we had a lot of the pieces and parts in place to do this, and we are
always looking for innovation,” says Susan Hawkins (pictured at right), Henry Ford’s senior vice
president of population health. “We are very interested in exploring what this
could mean in terms of new business and growth.”
Direct contracts between employers
and health systems, with no health plan in the middle, have been popping up
around the country for several years.
High-profile examples include Intel
Corp.’s 2013 contract with Presbyterian Healthcare Services in Albuquerque;
Boeing Co.’s partnership, beginning in 2016, with MemorialCare Health System
for the aerospace company’s Southern California employees; and Adventist
Health’s contract to provide healthcare services for Whole Foods’ workers in
Southern California, also starting in 2016. Walmart’s direct-contracting relationships
with Memorial Hermann Health Services in the Houston area and Ochsner Health
Network in Louisiana, which went into effect Jan. 1, 2018, show the retailer’s
growing interest in direct contracts; it has 10 such contracts in place.
Those leaders are attracting
followers, according to survey results from the National
Business Group on Health (NBGH), which includes 74 Fortune 100 companies that
provide healthcare coverage for more than 50 million workers, retirees, and
dependents. For 2019, 11 percent of NBGH members held a direct contract with a
health system, up from 3 percent in 2018.
That doesn’t mean 11 percent have
direct contracts that cover all their employees, but rather that they have at
least one direct contract for workers who live in a certain location. Those
employers are looking to replace fee-for-service arrangements with value-based
contracts in which health systems have financial incentives to control costs
and improve quality, says Ellen Kelsay, NBGH’s chief strategy officer.
Exhibit: Employer Interest in Direct Contracts in 2019 (click to enlarge)
Most employers do not have the knowledge
and experience to negotiate a contract with a health system, so Kelsay does not
expect direct contracting to become commonplace. But she does expect the trend
to grow. Employers that are tiptoeing into the model may expand to new
geographic locations incrementally in the years ahead, and employers that are
watching on the sidelines may soon jump in.
“Most employers are still going to
be heavily reliant on their health plan partners to do the negotiations and
contract arrangements with the systems and the providers themselves,” Kelsay
says. “Those who do it are going to be among the very most sophisticated, who
do have the bandwidth and inclination to pursue those types of conversations on
When GM sent out a request-for-proposal
seeking one or more health systems to enter into a direct contract for
services, Henry Ford was ready to pounce for two reasons.
Network adequacy. It already had in place a system—hospitals, primary care
practices, specialty services, home health, and pharmacy—to provide the
services GM wanted in the geographic area that the contract covers, says Amy
Vandecar (pictured at right), Henry Ford’s vice president of contracting and value-based
reimbursement. The health system had to contract with a few physician
organizations to ensure adequate coverage in a couple of neighborhoods, and it formalized
a working relationship with a pediatric hospital and some pediatric
subspecialists. But all other relationships were already established.
Experience with value-based care delivery. Henry Ford has owned a health plan
since the mid-1980s, giving it decades of experience with having financial risk
linked to its services. More recently, in 2016, the health system joined the Next Generation Accountable Care Organization
(ACO) model, a program of the Centers for Medicare & Medicaid Services.
The ACO, which includes all members
of the Henry Ford Medical Group, a few independent physicians, and all Henry
Ford facilities, provides care for approximately 25,000 Medicare patients in
southeastern Michigan. “We established a number of programs and capabilities to
be able to win in that upside-downside risk contract with CMS,” Hawkins says.
Those capabilities allowed Henry
Ford to improve care coordination and eliminate duplicate services, saving CMS
$5 million in the first year of the contract. Emergency department (ED) visits,
hospitalizations, and use of skilled nursing facilities (SNFs) were all
reduced, while primary care visits increased.
That translated into nearly $4
million in shared savings for Henry Ford’s first-year performance. Innovations
that contributed to its success include:
That experience has given Henry Ford leaders insights into
what they need to do to thrive under the GM contract. Success factors include:
The health system has two-sided risk in this five-year contract, so it needs to
understand the patients it will serve—before those patients are actually known.
GM provided Henry Ford with high-level demographic data and
two years’ worth of ED and hospital utilization data for all employees eligible
“We wanted to get a better sense of overall risk of this
population from a health perspective,” Hawkins says. “The clinical part was missing,
but we will have comprehensive information about the enrollees after the first
of the year.”
Disease management and
case management. Blue Cross Blue Shield of Michigan (BCBS-Michigan), which
provides the other health benefit options for GM workers, has traditionally offered
disease management and case management services as part of its contract with
GM. “We have those capabilities ourselves and we are going to take on all of
that” for employees in the ConnectedCare plan, Hawkins says. “We will identify
those people who need those services and do the outreach and clinical follow-up
Although BCBS-Michigan will process claims for the ConnectedCare plan, Henry
Ford will import claims data and match them with electronic health record (EHR)
data in its own enterprise data warehouse. This process will allow the health
system to understand the cost of serving the ConnectedCare members; quality
metrics for those patients; physician-level utilization patterns; and other
factors needed to manage the contract.
Patient relationship-building. GM salaried employees who chose
ConnectedCare are saving at least 67 percent on their employee premiums for
2019, with the exact amount depending on whether they enrolled in employee-only,
two-person, or family coverage.
While GM employees are accustomed to
being enrolled in a high-deductible health plan, they are not used to being in a
narrow network. Thus, educating patients about the benefits of choosing
ConnectedCare—and how to make that plan work for them and their families—is
essential. ConnectedCare members must be able
to identify providers and facilities that are in the Henry Ford network, switch
their care if they are being treated elsewhere, and understand the higher
out-of-pocket costs they will incur if they choose out-of-network care.
As 2019 open enrollment approached, Henry
Ford staff worked with GM staff to prepare materials for employees, making sure
that common questions—for example, “are dental benefits affected if I choose
ConnectedCare?” or “how does a health savings account work with ConnectedCare?”—were
addressed correctly. Henry Ford staff also accompanied GM employee-benefits
staff to meetings at worksites to discuss the new health plan option.
“We discussed at length what it
means to have more of a custom network, and what services we can offer to help
them stay within that custom network,” Hawkins says.
Now that open enrollment has ended, Henry
Ford is responsible for helping ConnectedCare members understand how to use
their new plan effectively. The health system established a concierge line,
just for GM workers, to answer questions and help them connect with new
“We also set up a web landing page
just for them,” Hawkins says. “It outlines what to do depending on your needs
today. So, if you're feeling sick, you have options for getting immediate
advice or treatment. If you are looking for an annual physical, we can help you
schedule a future appointment with a PCP.”
Utilization management. All physicians in the network, whether they are employed or
affiliated, will be eligible for financial incentives to deliver high-value
care. Physician liaisons will monitor utilization patterns and coach physicians
accordingly, which requires timely data.
“We need a better way to get near-real-time—at
least monthly—data to these physicians so they understand where they stand,”
The health system will use its own
EHR data to track in-network utilization, and leaders are working with
BCBS-Michigan to get timely claims data about out-of-network care that
ConnectedCare members receive. That information will allow Henry Ford to alert
a patient’s in-network physicians so they can encourage the use of in-network
facilities and providers.
Lola Butcher writes about healthcare business
and policy topics for several HFMA publications.
Interviewed for this article: Susan Hawkins, senior vice
president-population health, Henry Ford Health System, Detroit; Ellen Kelsay,
chief strategy officer, National Business Group on Health; Amy Vandecar, vice
president of contracting and value-based reimbursement, Henry Ford Health
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Large Health System Drives 10% UP (Patient Payments) and 10% DOWN (Billing-related Costs)
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ICD-10: Managing Performance
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Clarity Drives Collections
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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
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Streamlining the Patient Billing Process
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7 Steps for Building and Funding Sustainability Projects
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Key Capital Considerations for Mergers and Acquisitions
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Key Capital Considerations for Mergers and Acquisitions
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Trend Watch: Providers adapt as value-based care moves from hype to reality
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Yuma Regional Medical Center case study
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Denials Deconstructed: Getting Your Claims Paid
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The client was a nine-hospital health system with 14 clinics serving communities in a multi-state market with very limited access to care, poor economic conditions, high unemployment, and a heavy Medicare/Medicaid/uninsured payer mix. In most of these communities, the system was the sole source of care.
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