‘We were completely wrong’: How Henry Ford Health System won a major direct contract

December 16, 2019 10:29 pm
  • Henry Ford won a direct contract with GM that started in 2019
  • The five-year contract includes increasing downside financial risk tied to financial and health-quality measures.
  • The shift to physician employment has helped Henry Ford’s performance under the contract.

When General Motors executives gathered to consider direct-contracting bids solicited from three Michigan health systems, none was willing to bet on Henry Ford Health System.

However, the subsequent review of the providers’ bids revealed that only Henry Ford could meet the direct-contracting requirements of the large national employer.

“We were completely wrong. Every single one of us,” Sheila Savageau, U.S. healthcare leader at General Motors (GM), said in a recent presentation to congressional staff.

The Henry Ford deal, which launched at the start of 2019 as one of the coverage options for 23,000 GM beneficiaries in the Detroit area, is the auto manufacturer’s only direct contract with a provider. In five other value-based arrangements it operates for employees across the country, health plan intermediaries are involved.

The GM direct-contracting initiative is part of a larger trend, with the share of large employers contracting directly with health systems and providers in local markets planned to reach 10% in 2020 and another 21% considering undertaking them in the next two years , according to the National Business Group on Health.

Factors that helped Henry Ford win the GM direct contract included its:

  • Ability to drive care delivery changes
  • Experience with measurable, quality-driven contracts
  • Ability to manage large amounts of data
  • Comprehensive clinical and administrative connectivity and interoperability
  • Ability to meet network requirements
  • Ability to take on growing financial risk and quality requirements over the term of the contract
  • Ability to provide “concierge” service

What type of contractual experience was considered important?

Part of GM’s review of the contract application included comparisons of the applicants’ performance in models from the Centers for Medicare & Medicaid Services (CMS), such as the Next Generation Accountable Care Organization program.

Next, the manufacturer examined performance on CMS quality measures, such as those tracking hospital-acquired conditions. Applicants’ scores on the Hospital Consumer Assessment of Healthcare Providers and Systems survey also were compared.

Capacity to take on downside risk was deemed critical

The ability of Henry Ford to take on open-ended downside financial risk as part of the contract was “absolutely critical,” Savageau said. GM rejected at least one direct-contract proposal that requested to cap the provider’s financial risk at $1 million.

The manufacturer established a five-year contract with the health system because Savageau anticipated it would take three years or more to begin realizing the desired financial and clinical benefits.

Although the contract includes increasingly stringent health-quality outcomes and financial benchmarks, Savageau said the carmaker still may offer performance bonuses if Henry Ford meets the health goals but narrowly misses the financial goals. The model measures the system’s performance using 19 quality measures.

“Because to me, the quality is more important,” Savageau said. “The other thing we’ve seen over time is whenever quality improves, costs actually go down.”

In exchange for an anticipated patient volume increase, the health system agreed to use a “Medicare-plus pricing model.”

Operational details that make a difference

The large number of employed physicians at Henry Ford improves the functioning of the model, GM has found.

“That’s the biggest, most significant factor that you can have with a health system,” Savageau said. “If we have a physician issue that arises, I pick up the phone and I call one person and that one person is contacting the physician.”

Savageau said it also was important for GM to determine whether the health system’s senior leaders were committed to the contract.

“You have to go all the way to the board of the health system and ask, ‘Is this really your mission?’” Savageau said.

The model has gotten off to a somewhat modest start, enrolling 11% of eligible employees this year. But Savageau was optimistic that up to 90% in the area eventually may enroll.


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