June 16, 2010

Blue Shield of California, Catholic Healthcare West (CHW) and Hill Physicians Medical Group Inc. are six months into their partnership to cut healthcare costs and keep premiums flat for 40,000 CalPERS members in Sacramento and they are finding success.

This team represents one of the first in the nation to form an accountable care organization (ACO), well before President Barack Obama signed the Patient Protection and Affordable Care Act in March. That healthcare reform package is calling for the healthcare industry to voluntarily create ACOs.

ACOs can be formed between hospitals, healthcare providers and other entities and are designed to better coordinate care for higher quality and reduced costs.

Blue Shield, CHW and Hill are on a big learning curve and have invested a lot of money, resources and people in the pilot project, so while the participating California Public Employees’ Retirement System (CalPERS) members in Sacramento will benefit this year, the trio of providers won’t see their savings until probably next year, said Juan Davila, senior vice president for network management at Blue Shield.

Dan Robinson, Chief Administrative Officer for Hill Physicians of San Ramon confirmed that.

“This is a very complicated complex project. We’re trying to coordinate the activity of three very different organizations with different cultures and leadership. But I believe we’ve overcome the challenges,” he said.

Blue Shield, CHW and Hill started discussions about this project in 2008, signed a contract in 2009 and went live with it Jan. 1 of this year. They promised to keep premiums flat for this year and invited CalPERS members in Sacramento to sign up. They got 40,000 takers.

So this year those CalPERS members will not have any premium increases. Currently Blue Shield is negotiating a price for next year. Premiums will go up a little, but not as much as the 8 percent to 10 percent increase that members outside this program will probably see, Davila said.

Because all of the organizations are now sharing their data, they have found three areas in particular where costs are higher than they need to be. Those are preventable readmissions, patients getting out-of-network care that could be in-network and some surgeries such as hysterectomies and elective knee surgeries that could be better managed with other treatment.

Davila said many patients simply get admitted to the wrong hospital, one that doesn’t take their insurance. And many times patients with knee problems get referred to surgeons who may not necessarily fully explore alternatives, like rehabilitation, Davila said.

“Until fee-for-service goes away, every doctor across this country has an incentive to do something for you,” he said.

Integrated discharge planning is another area of potential savings. For instance, if a hospital patient needs to go home with a wheelchair, but the doctor has to coordinate with the hospital and the hospital with the insurance company and if that doesn’t happen efficiently, it means another day or two in the hospital at between $4,000 to  $6,000 a day, Davila said.

“The whole point of the team concept is we’re all at risk here,” he said. “The three of us have lost money, but the good news is we’re all learning, it’s a learning expense. And all three of us still want to continue this,” he said. And they expect savings next year.

Blue Shield has another five potential California ACO pilots in the works and Davila said he’s hoping to have some of them confirmed by the end of next year.

Hill is also looking for ways to apply what it learns during this partnership to a broader base of its operations, Robinson said.