Thinking globally an attempt to lower health costs

'Payments should translate to a more efficient system.'

With the country now spending more on health care than any other industry – including defense, according to Medicare’s latest statistics – reform has assumed top priority among state and federal officials. And initiatives being undertaken in the region are starting to show that there is hope in the battle to get health care spending under control. More

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Focus: INSURANCE

Thinking globally an attempt to lower health costs

'Payments should translate to a more efficient system.'

Posted 4/2/12

With the country now spending more on health care than any other industry – including defense, according to Medicare’s latest statistics – reform has assumed top priority among state and federal officials. And initiatives being undertaken in the region are starting to show that there is hope in the battle to get health care spending under control.

The first large-scale experiment with a new payment regime began in May 2011, when Blue Cross & Blue Shield of Rhode Island and South County Hospital contracted for a global payment system, in which the hospital received a per-capita budget to tend to its patients, instead of payments based on whatever services were provided.

This approach requires the provider to assume accountability for efficiency, cost control and preventive care. As a result, the provider focuses on keeping its patients healthy through good primary care while at the same time relying less on costly medical specialists. If the hospital is successful, its profit would increase.

So far, the South County-Blue Cross deal has been successful. According to Lou Giancola, president and CEO of the hospital, both parties like the system. “We wanted to be able to implement changes in practice that might lead to reductions in volume,” he said. “We tried to improve the transition of care from the hospital back to the primary care physician, to avoid readmission.”

On the cost side, at least part of the success of the program is a result of the initial budget being based on the previous year’s costs plus a safety factor so as not to shortchange the hospital

In the future, however, the difficulty will be renegotiating the initial budget, as both insurer and hospital fight to maximize profits.

When asked to comment on the deal’s success or failure, Blue Cross Director of Public Relations Kimberly Reingold declined, due to contract negotiations. But it is clear that the old way of structuring contracts is not part of the discussion.

“[We are also] looking at other incentives, such as shared-savings contracts, such as our recent announcement with Coastal Medical, where providers become eligible for additional financial compensation when meeting quality measure. If met, the organization then becomes eligible to share a percentage of any meaningful medical cost savings experienced by their group of patients,” she said.

Reingold was referring to the March 19 announcement that Blue Cross and Coastal Medical, the state’s largest primary care provider, entered into a two-year contract in which a fee per visit remains in place, but the focus is on primary and preventive care through the creation of patient-centered medical homes for its clients. Should Coastal meet certain health care standards, it can share a percentage of the medical cost savings.

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