Blue Cross Blue Shield of Michigan wants to extend a new payment model across the state that both rewards and penalizes physicians and hospitals for beating or missing cost and quality targets.
The health insurer’s Blueprint for Affordability contract begins Jan. 1 for Medicare Advantage and commercial PPO plans with seven health systems and physician groups. That includes at Trinity Health Michigan, the parent organization of Mercy Health in West Michigan and its medical group.
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Blue Cross Blue Shield begins the initiative with care provides mostly in Southeast Michigan where it has the highest density of PPO members. The Blues intends to extend the model in the future to its HMO product and to pursue contracts with additional health care providers throughout Michigan.
“We look forward to welcoming more physician organizations and health systems to this effort in the years ahead. In fact, it’s our goal to have every health system and physician organization to participate in the Blueprint model,” said Todd Van Tol, senior vice president for health care value at Blue Cross Blue Shield.
“We really see this as a way and a model that will extend across all of our relationships inside the state,” he said. “We know health care costs are unsustainable and it takes all of us working together to change course.”
Beyond the financial aspects, Blueprint for Affordability includes “commitments to work together differently,” Van Tol said. That includes enhanced data sharing from Blue Cross Blue Shield so care providers can better understand patient populations and act more proactively to deliver care, prevent illness and maintain health, he said.
Blue Cross Blue Shield for 15 years has used so-called value-based reimbursement contracts that reward doctors and hospitals for improving the quality of patient care and reducing costs. That effort saved $2.2 billion in costs over the years, “but more needs to be done. We need even stronger and more ambitious efforts to make health care more affordable,” Van Tol said.
The Blueprint for Affordability takes value-based contracting further by introducing downside financial risks into care providers’ contracts with Blue Cross Blue Shield, moving further away from the traditional fee-for-service model that pays hospitals and physicians based on volume.
Through the risk-sharing payment model, health systems and physicians agree to a “level of financial accountability for managing the quality and cost of this care,” said Stephen Carrier, senior vice president of network management and provider partner innovation at Blue Cross Blue Shield. The model will measure “how well they manage the health outcomes of their patients and the total cost of care,” Carrier said.
“While previous Blue Cross contracts have introduced the concept of upside financial risk, for example bonus payments for meeting quality goals, this is the first time we’re adding downside financial risk into the equation,” he said. “In these Blueprint contracts, providers are putting a portion of their payments at risk by sharing financial accountability for care and outcomes. This is truly a new approach in Michigan.”
Under Blueprint for Affordability, care providers can earn rewards for coming in below agreed-upon cost targets and meeting quality metrics. If they miss, physicians and hospitals must pay back a portion of the money spent beyond the targeted amount.
That gives Blue Cross Blue Shield clients predictability on costs and provides incentives for care providers to improve cost, quality and care coordination.
“We believe this will make a significant impact on the health care landscape in this state,” Van Tol said.
As Michigan’s largest health insurer, Blue Cross Shield covers 4.7 million Michigan residents. The Blueprint for Affordability with the initial seven health systems and physician groups covers 30 percent of the 1 million people enrolled in commercial of Medicare PPO policies.
The participating care providers collectively accounted for $4 billion in spending by Blue Cross Blue Shield in 2018. Those providers, all based in Southeast Michigan, are:
- Ascension Michigan, but not including Kalamazoo-based Ascension Borgess
- Henry Ford Health System in Detroit
- Michigan Medicine in Ann Arbor
- Oakland Southfield Physicians
- The Physician Alliance in St. Clair Shores
- Trinity Health – Michigan
- United Physicians
How much Blue Cross Blue Care can actually save from that spending remains an unknown right now, Carrier said.
“We don’t have a crystal ball as far as knowing exactly how much this will save,” Carrier said. “We expect over the next few years that there will be significant savings.”
The added financial risk that comes with the risk-sharing payment model doesn’t worry the Livonia-based Trinity Health, which includes Mercy Health Saint Mary’s in Grand Rapids, Mercy Health in Muskegon and Mercy Health Physician Partners.
Blueprint for Affordability is “basically an extension” of Trinity Health’s decade of value-based contracting with insurers that includes accountability for outcomes and cost management, said Harpreet Cheema, Trinity Health’s vice president of product development and payer strategy.
Trinity “has demonstrated success” as well with a risk-sharing payment model with Medicare, Cheema said. That experience gives Trinity Health comfort in taking on the downside risk of the model behind Blueprint for Affordability, he said.
The new arrangement with Blue Cross Blue Shield represents “a natural step in our strategy to improve care while managing costs for our patients,” Cheema said.
“We believe in attempting the work that we have been doing that we’ll be able to generate a fair share of dividend again,” he said. “Downside risk doesn’t scare us.”
Blue Cross Blue Shield believes the risk-sharing model will pay dividends for other health systems and physician groups in the state — even if they’re not participants — by fostering greater collaboration between care providers and the insurer to focus on quality.
“It sets a precedent,” Van Tol said. “We anticipate it will improve the quality and efficiency of care for all Michigan residents.”
