Bend the Insurance Cost Curve
Fairview Health Services’ Eagan clinic stands out as a provider of primary health care. Two years ago, it started getting better results—fewer repeat visits or hospitalizations for its patients, a much smaller rise in costs—than dozens of other clinics in the Fairview system.
Katie Holley-Carlson, manager of the Eagan clinic, wondered if something was wrong with the phone system. Incoming calls were down about 20 percent. “Do people hate it [here]?,” she asked herself. “Are they leaving?” Then she analyzed the call records more closely and realized that patients no longer had to phone in multiple times to get a problem addressed.
In 2009, the Eagan clinic was one of four to pilot changes in the way Fairview operates. The clinic’s 15 doctors are now organized into teams of three or four each, whose desks are grouped together so they can easily discuss cases. Each team has a coordinator who shepherds cases through clinic procedures. If your case is routine enough—a sore throat—it might never go to a physician. A nurse practitioner on the team will take a throat swab and prescribe antibiotics if needed.
Have high blood pressure? A nurse will counsel you on how to manage your chronic condition.
Have diabetes? You might notice that the clinic is unusually attentive about calling you to come in for your hemoglobin A1C test. That’s because making sure diabetic patients regularly get the test is one of five items that Fairview tracks to measure the performance of its teams when it comes to diabetes care.
In fact, Fairview now ranks doctors and teams on the treatment of several chronic diseases, not just diabetes. Color-coded charts with the results are posted throughout the clinic monthly. Everyone knows how each team stacks up to the others, and teams meet regularly to find ways to improve.
The outcome a year after implementing these changes was eye opening: At the four clinics that piloted Fairview’s care “redesign,” the average cost of care per patient—including everything from primary care to treatment by specialists to hospitalization—rose 6.3 percent from June 2009 to June 2010. At the other 38 Fairview clinics, it rose 12.2 percent. Minneapolis-based Fairview Health Services has since expanded the pilot procedures to all of its clinics.
What might be more surprising than the results is that Fairview wasn’t operating this way before. Why haven’t the Fairview system and other health care systems already been working in these more efficient ways for years, if not decades? Because there was no incentive to improve.
Care follows the money
What changed for Fairview—and is changing now for an increasing number of health care systems around the country—is that an insurer, in Fairview’s case Minnetonka-based Medica, agreed to help pay for the extra staff and information technology that enabled Fairview to overhaul its clinics.
Meeting over dinner at Vincent in downtown Minneapolis in the summer of 2008, Fairview CEO Mark Eustis and Medica CEO David Tilford didn’t know what the brewing national debate over health care reform would bring. What they knew was this: They were tired of the wrangling between their organizations each year over the rates Medica would pay Fairview for each test and procedure performed on Medica health plan members. Especially now, with a Baby Boom generation on the cusp of old age, they wanted to focus on improving people’s health and minimizing the need for care.
“Wouldn’t it be something remarkable if we could put that”—rather than rates—“in the center of a discussion?” Eustis recalls them saying.
“With Mark and I, we had a common understanding that to simply do what we had always been doing wasn’t going to solve the problem,” Tilford says.
So Eustis made an offer. He would accept lower reimbursement rates from Medica and agree to a three-year contract instead of the usual one-year term, if Medica would pay incentives—more precisely, share its cost savings—to reward Fairview’s measurable improvements in effectiveness and cost of care. Fairview would get the money it needed for the care redesign that Eustis was proposing, and Medica hoped that more effective care would reduce what it paid out per patient down the road.
Other large insurers in the state, including Eagan-based Blue Cross and Blue Shield of Minnesota and Bloomington-based HealthPartners, also began paying incentives to Fairview and to other Minnesota health care systems in 2010 to reward their reforms.
In fact, Minnesota’s health care industry is an early adopter nationally of this new model, in which health care systems agree to become “accountable care organizations” or ACOs. The term emerged from the debate over federal health care reform. There’s no single, concise definition of an ACO yet, and other pioneering variations on the model are being tried around the country, by Pennsylvania’s Geisinger Health System and California-based Kaiser Permanente, among others. In the Fairview-Medica model, Fairview agreed that rather than simply getting paid to treat any patient who showed up, it would take additional responsibility for the population of Medica plan members who frequent Fairview’s primary care clinics. Medica is holding Fairview accountable for that specific population of about 70,000 patients, both for improving the quality of their health, and for controlling what it costs to keep them healthy.
ACO relationships are a big deal because of the early results they’ve shown, and because in 2012, Medicare—the government’s health insurance program for seniors, and the largest health care payer in the United States—will start reimbursing this way nationwide as a provision of the 2010 federal Patient Protection and Affordable Care Act.
Typically, government and private insurers pay for each test done on a patient, each visit to the doctor, each hospital admission, each procedure. Many in the health care industry agree that it’s a huge incentive to maintain the quantity, not the quality, of care provided.
Dr. Lynne Fiscus, lead physician at Fairview’s Eagan clinic, is frank about the way that facility used to operate, and the way most health care facilities have traditionally operated: “As a primary care clinic, our primary function was to feed patients to the hospital for admissions, for procedures.” Now, there’s been a shift, she says. “The focus should really be on ‘How do we keep a population of people well? How do we keep a population healthy and serve them?’” Early experience means influence
If Eustis and Tilford had a revelation back in 2008, Tony Miller and his Carol Corporation are acting as their missionaries.
Carol Corporation, a consulting firm based in St. Louis Park, has been an adviser on Fairview’s care redesign. The company also provides proprietary analytics software that Fairview uses to help its doctors and staffs track how well they serve their patients.
More sharing and tracking of patient information is a key piece of the agreement between Fairview and Medica. Medica, for instance, now gives Fairview data on the Fairview primary-care patients who cost Medica’s insurance plans the most money due to frequent admission at hospitals and emergency rooms. Since August 2010, Fairview hospital staffs have been channeling these patients, many of whom have multiple chronic conditions, into a care coordination program when they’re discharged. Staff across Fairview hospitals and clinics can carry out a unified care plan for each person as a result. Of the 400-plus patients that Fairview signed up for coordinated care in the program’s first five months, only 8 percent required re-admission to a hospital within 120 days. Previously, 37 percent of such patients were back in the hospital.
Carol Corporation is using lessons like that one from the Fairview-Medica partnership to advise health systems around the country. In one recent project, Carol identified ways that Des Moines–based Iowa Health Systems could improve its care, then used that information to help the Iowa system strike a deal similar to the Fairview-Medica relationship with insurer Coventry Health Care, Inc., of Maryland.
Miller, Carol Corporation’s founder and CEO, says each health system–insurer relationship has unique issues. For example, he says, Minnesota health systems are much more integrated than those in other parts of the country, where hospitals will have to forge closer relationships with independent physicians to form an ACO.
“Every system is going to be different,” Miller adds.
That’s true even under the proposed rules issued in March by the U.S. Department of Health and Human Services for the Medicare ACOs that will be in place next year. “U.S. health care is diverse” in its organization, wrote Donald Berwick, head of the federal Centers for Medicare and Medicaid Services (CMS). “We expect that ACOs will be similarly diverse,” and may be led by hospitals, physician groups, networks of doctors with individual practices, or other types of partnerships.
Fairview and Medica executives gave data on their efforts to the CMS officials framing the proposed Medicare rules. Fairview also is active in the Premier Healthcare Alliance, a group of about 30 health systems across the country that are sharing information on best ACO practices with each other and with Berwick’s CMS. Premier, Inc., a North Carolina nonprofit that negotiates purchasing contracts for groups of hospital systems, organized the alliance last year.
Premier’s Blair Childs says other health care systems around the country also have supplied data to CMS. Several—Park Nicollet Health Services in St. Louis Park, Pennsylvania’s Geisinger Health System, the Billings Clinic in Montana, the Marshfield Clinic in Wisconsin—have experimented with reimbursement models as part of a Medicare pilot project in the past decade, he says.
But according to Childs, Fairview has had a great deal of influence in the Premier Alliance and with Medicare and Medicaid officials (who declined to comment for this article). Fairview is now one of fewer than a dozen health care providers in the country with multiyear ACO experience, Childs notes: “They’re definitely an organization that’s been looked to as progressive and smart and taking accountability for improving the patient experience and lowering cost simultaneously.”
David Moen, president of Fairview Physicians Associates, says rather than waiting for CMS to establish rules, Fairview has tried to shape what’s going to happen: “We firmly believe that providers need to take a more active role in leading this transformation.”
Employers want accountability, too
Another notable local ACO partnership is the Northwest Metro Alliance, formed last year. The ACO in that case consists of four HealthPartners clinics in the northwest Twin Cities metro, four primary care facilities of the Allina Hospitals & Clinics system, and Allina’s Mercy Hospital in Coon Rapids. HealthPartners, which is also an insurer, pays incentives to these facilities under the arrangement, which coordinates and provides care for 300,000 patients.
As ACOs emerge, they look somewhat familiar to the Bloomington-based Buyers Health Care Action Group. BHCAG is made up of 37 employers, including some of the largest in the Twin Cities, whose goal is to reform health care and health care payment systems on behalf of consumers and insurance buyers. The group launched its own insurance program in 1997, Choice Plus, which had a tiered structure meant to financially reward the health care providers that were the most efficient and effective. But BHCAG President Carolyn Pare says the program didn’t have the critical mass needed to really change health care in Minnesota. It made up only about 10 percent of health care payments in the state, she says. Choice Plus eventually was acquired by Medica.
Given BHCAG’s own efforts in a similar direction, the advent of ACOs would seem to be good news for the group’s members. But Pare believes employers have reason for some skepticism about ACOs and whether cost savings will be enjoyed by the business community. While health care providers and insurers are sharing information with each other in these arrangements, they still aren’t disclosing enough information to employers and health care consumers, in Pare’s view. She wonders who will hold the ACO partnerships accountable.
“What kind of cost or quality information are we going to see, or [is that] going to be protected by proprietary contracts we know nothing off?” Pare asks. “We want a clear definition of what ‘accountable’ is, and who’s accountable for what.”
Pare says experience has made her group’s members better equipped to look at ACOs with a critical eye. “I think the employers are in a place where at least they know what questions to ask,” she says. “They’re a lot more aware than they were 20 years ago.” Just how involved they’ll want to be in ACOs or similar partnerships as a result is an open question.
“I think it’s a win-win-win if insurers, the business community, and providers themselves can work together to make the whole system more efficient and higher quality,” says Sarah Ree, director of employee benefits for Richfield-based Best Buy. “I think we will be right there at the table” as health care reforms continue. Six years ago, BHCAG formed a Minnesota affiliate of the national nonprofit Bridges to Excellence program, which Best Buy, a BHCAG member, supports on both the state and national level. Bridges to Excellence gives monetary rewards and recognition to health care providers that achieve specific measures of quality and effectiveness in care for diabetes, depression, and vascular disease.
General Mills comes at health care reform differently. Dr. Julia Halberg is vice president of global health and chief medical officer for the Golden Valley–based food processor. She says she meets with executives of health care provider organizations in communities where General Mills has facilities. She privately shares insurance claims data with them to show them how well their organizations are serving General Mills workers.
But instead of trying to transform health care systemically, Hallberg says, General Mills concentrates primarily on health and wellness programs among its own work force. “Our area of expertise isn’t health care,” she says. “With this new health reform, we’re all kind of watchful and waiting, so to speak . . . . We can be innovative with our prevention programs.”
One large Twin Cities employer—the University of Minnesota—is considering forming its own version of an ACO. The school’s health plan covers 38,000 employees and their dependents. University officials are looking at providing incentives to make local providers more accountable for care given to that university population.
Dan Chapman, the University of Minnesota’s director of employee benefits, says the school could rely on one of the health insurers that manage the U’s health care plan to set up an ACO. But the university has additional claims data on its workers that could be useful, he says, not to mention in-house health care expertise among its faculty.
Chapman says, “We very much want a place at the table in designing the plans, the contracts, the relationships, so they’re a three-way relationship between the third-party administrator, the providers, and ourselves.”—Chris Newmarker
HOW Long will ACOs Make sense?
At the start of its ACO relationship with Fairview, Medica made “an investment, in cash, out of Medica’s reserves,” to help Fairview improve its systems and bring down the cost of care, says Mark Lenz, a Medica vice president. Insurer Medica also agreed to a roughly 50-50 split with Fairview of any savings that resulted.
Given those added payouts, how does Medica benefit from working with an ACO?
It’s a matter of compounding, Lenz says. The new relationship with Fairview was “a wash” financially for Medica in the first year. But because Fairview agreed to receive lower fees for services than it otherwise would have, the base for subsequent rate increases was also reduced. By year two, the ACO agreement put Medica ahead of where it would have been financially, Lenz says.
By now, most big care providers in the Twin Cities have ACO partnerships with Medica, but they can only earn their incentives by surpassing the rest of the market in reducing costs. How long can that kind of competition stay effective? “We have acknowledged that long term,” probably within three years, “we are going to have to change the model a little bit,” Lenz says. “We don’t want to create a situation by which they’re eliminating necessary utilization [of care].”