Shared Savings Pilot Program Case Study: Managed Care Organization and Health System

The Remington Report‘s case study of a Medicare Shared Savings Pilot

Early adaptors in shared-savings pilot programs are they working? Explained here – partnership with a managed care organization and a health system.

Blue Cross Blue Shield of Illinois & Advocate Health Care

Blue Cross and Blue Shield of Illinois (BCBS IL) is the largest health insurance company in the state, insuring more than 6.5 million members. BCBS IL offers a full range of products for individuals, families, employer groups, and seniors, including a shared-risk HMO with more than 800,000 members served by some 75 physician groups. BCBS IL has received accreditation from NCQA and the Utilization Review Accreditation Commission.

Advocate Health Care, a faith-based, not-for-profit system based in Oak Brook, Illinois, is the largest integrated health care system in the state, and one of BCBS IL’s largest networks of provider practices. Advocate encompasses more than 250 care sites, including 10 acute care hospitals and two integrated children’s hospitals.

BCBS IL began a shared-savings program in 2011 with Advocate for services delivered to members of a PPO, most in a seven-county Chicago area, plus one hospital in Bloomington, Illinois. Two groups of Advocate primary care physicians are participating in this program: employed physicians, and 900 doctors in a physician hospital organization, for a total of 3,500 physicians.

Why Shared Savings?

BCBS IL and Advocate both recognized that the current health care cost structure was unsustainable. According to an Advocate interviewee, “We wanted to systematically eliminate waste through various initiatives (decreasing ER visits, shortening length of stay, managing ambulatory-sensitive conditions to avoid admissions). We believed that by working collaboratively we could develop a creative approach and step outside the usual adversarial relationship between providers and payers.”

BCBS IL cited several reasons for choosing Advocate as a partner. First, it was both a high-quality and a high-cost provider. Second, Advocate’s historic commitment to improving health care quality and infrastructure reassured BCBS IL that the organization would deliver high-quality care even with incentives to reduce costs. Third, BCBS IL and Advocate have several years of successful experience with a shared-risk arrangement BCBS IL uses with HMOs.

Shared-Savings Methodology

Patient Population: Attribution and Minimum Size – The shared-savings arrangement applies to members enrolled in fully insured and self-insured commercial PPOs. The pilot excludes members insured under the Federal Employees Health Benefits Program.

BCBS IL uses a confidential methodology, developed with Advocate, to attribute patients to a provider group based on a two-year look-back and a tie-breaking algorithm. BCBS IL shares reports of attributed populations on a monthly basis with Advocate, and the December 2011 attributed population was to be used for its initial shared savings calculation.

BCBS IL has set no minimum size for the patient population of participating provider groups. However, BCBS IL sought a provider with a substantial population for this first arrangement with an accountable care organization.

Determining and Distributing Savings – Advocate and its physicians must fulfill two requirements to receive shared savings: they must reduce costs and achieve quality outcomes. For the first requirement, BCBS IL compares baseline medical costs for the attributed population to the medical costs of patients served by the rest of BCBS IL’s PPO network. To qualify, Advocate’s trend must be lower than the risk-adjusted trend of the nonparticipating PPO network by more than a predefined amount.

After Advocate has fulfilled this requirement, participating physicians must also meet minimum quality thresholds to receive shared savings. In the first year of the new approach, Advocate physicians had to maintain performance on 12 quality measures, and faced penalties if performance declined. In the second and third years, Advocate and BCBS IL planned to negotiate targeted increases in an expanded set of measures.

If Advocate achieves overall savings and participating physicians pass the quality “gate,” they are eligible to share up to about 50 percent of the cost savings – minus a confidential percentage set aside to offset BCBS IL’s investments in infrastructure. To ensure a transparent process, BCBS IL has given Advocate the right to audit its calculations.

Adjusting for Patient Risk– BCBS IL uses DxCG software to account for variations and changes in the risk profile of Advocate’s patient population. However, BCBS IL has chosen not to limit the risk that providers face for patients with extremely high costs, because the number of patients covered by the shared-savings arrangement is large, and BCBS IL assumes that a normal distribution of patients will occur across providers.

However, BCBS IL excludes the costs of a few high-cost services, such as transplantation, from the savings calculations. When determining the cost trend for the nonparticipating BCBS IL network, to compare with Advocate’s costs, BCBS IL also excludes very low-cost claimants whom it could not attribute to a provider.

Technical Assistance – Participating practices receive reports, data feeds, and access to software tools that allow them to download data directly into their electronic medical record systems. BCBS IL also provides analytical support on treating targeted groups of high-risk members.

BCBS IL’s Experience With The Shared-Savings Model

While the model is still relatively new, BCBS IL believes that its basic framework – especially the quality targets – is sound. Although it notes that the methodology may evolve, BCBS IL hopes that participants in other markets can use it as a template.

Note: Commercially insured HMO members are in a different type of full-risk contract with BCBS IL.

Results of ACO:

  • AdvocateCare, the largest commercial ACO with 380,000 members, saw readmission rates for chronic conditions drop 26 percent, thanks to transition coaches.
  • ACO patients sent to nursing facilities had a 13.6 percent readmission rate during the first year of operation, falling below the 20 percent national average.
  • During the first half of 2011, the ACO led to a 10.6 percent drop in hospital admissions per member, compared to 2010, and a 5.4 percent decline in emergency department visits.

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