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Big Insurer Unveils Innovative New Alliance with Doctors, Hospitals

Approach promises lower costs, with payments based on whether patients are kept healthy rather than traditional fees for services

ONLY USE THIS HORIZON

If you’re a New Jersey hospital CEO or doctor resistant to changing how you’re paid, things will become a little more difficult starting today.

That’s because Horizon Blue Cross Blue Shield of New Jersey, the state’s largest insurer, is announcing its largest move yet away from paying healthcare providers based on how many services they provide toward a system in which payments will be shaped by whether providers are keeping patients healthy.

The OMNIA Health Alliancea partnership between the insurer and seven providers – six hospitals and the state’s largest doctors group – aims to change how healthcare is paid for and delivered.

“It is a very big deal,” said Joel Cantor, director of the Rutgers Center for State Health Policy. “I think it’s an impressive plan. It’s a sharp change in direction from where New Jersey healthcare had been.”

The most immediate impact for most Horizon customers will appear next month, when the alliance plans to announce a new set of health plans with much lower out-of-pocket costs as well as reduced monthly premiums for those who choose the plans.

What those customers will be getting is somewhat similar to what is already happening in accountable care organizations – which are arrangements in which insurers (or the federal government, in the case of Medicare) pay providers partly based on whether they reduce costs while meeting measurements of quality healthcare.

For Horizon, the alliance allows it to potentially attract more customers with a low-cost plan.

The alliance payments, like those in many ACOs, also will focus on coordinating patient care, such as dedicating a nurse to work with chronically ill patients to make sure they keep appointments and take appropriate medicines.

Roster of major health networks

The alliance providers are: Morristown-based Atlantic Health System; West Orange-based Barnabas Health; Hackensack University Health Network; Flemington-Hunterdon Healthcare; Inspira Health Network of Woodbury; New Brunswick-based Robert Wood Johnson University Medical Center; and Summit Medical Group, the only non-hospital in the group.

Notably absent are some other well-known healthcare brands, including five-hospital Meridian Health; South Jersey rivals Cooper University Health Care (chaired by South Jersey political and business leader George Norcross) and Virtua, and numerous others. For some of these hospitals, being outside the alliance will mean fewer patients and less revenue, since Horizon policyholders will head elsewhere for healthcare.

It’s not yet clear exactly which non-alliance hospitals will lose out the most, since the OMNIA health plans will still include some non-alliance hospitals and physician practices in their most selective “tier,” a term for the providers that patients must visit if they want to pay the lowest costs. Influenced by state regulations that insurance networks are geographically widespread, the top OMNIA tier will likely cover some of the gaps in the six counties that don’t have alliance member hospitals: Atlantic, Burlington, Camden, Cape May, Passaic, and Warren.

The alliance does have some of the wealthiest counties in the state well-covered.

Horizon Chairman and CEO Bob Marino emphasized that the highest tier should not be considered a “narrow network,” since the OMNIA plans will include all of the providers that are in other Horizon plans. Instead, consumers will be able to choose top-tier providers at little cost or other lower-tier, in-network providers with greater out-of-pocket costs (or, out-of-network providers at still greater cost).

It’s a point that Horizon is sensitive to, since some providers and consumer advocates have raised concerns that the so-called “narrow networks” can reduce access to healthcare, and potentially compromise the quality of care.

Along with lower costs to patients, alliance members have agreed on a new model for working together, built on Horizon’s previous experience with ACOs. Their relationships will be governed by joint venture contracts that will require more extensive collaboration than traditional insurance contracts, with the insurer and provider agreeing to meet regularly to discuss how to improve healthcare quality, lower costs, and improve patients’ experiences.

Horizon also will involve the providers to a greater degree in the decisions about what treatments to approve. And Horizon will be sharing its claims information with providers more completely, allowing providers to gain a more extensive picture of their patient’s health.

“As you change the incentives for providers, they are very motivated to … change their behavior or their performance,” said Kevin P. Conlin, Horizon’s executive vice president of healthcare management.

He added that the ultimate goal is to shift to a system in which healthcare providers will risk being paid less if they require spending unusually high amounts for the quality of the care that they provide.

Dramatic cuts in insurance costs expected

The price cuts for those who choose OMNIA plans are expected to be dramatic. While the alliance didn’t release details yesterday, sources briefed on the plans expect them to offer “thousands of dollars” in annual savings, particularly in deductibles – the amount that patients must pay out-of-pocket for many services before insurance kicks in.

Horizon built the Alliance evaluating all hospitals in the state based on their clinical quality performance, their demonstrated commitment to transforming how they deliver care, their reputation with Horizon customers, and their geographic coverage, Conlin said.

The approach is entirely new for New Jersey and has relatively few precedents nationally. The Blue Cross Blue Shield insurer in Massachusetts offered a similar plan that managed to lower costs by 40 percent for those who switched to a limited insurance network, while delivering healthcare that met standards agreed upon by both insurers and providers.

Healthcare analysts given early notice of the alliance plans were impressed.

Dan Mendelson, president of Washington, D.C.,-based company Avalere, drew a parallel with the U.S. Centers for Medicare and Medicaid Services’ attempts attempts to pivot away from for-service payments. And the Massachusetts experience offers reason for hope.

“There’s evidence that these kinds of programs can achieve the outcomes that consumers want,” said Mendelson, whose firm advises healthcare companies on payments, the Affordable Care Act, and other issues.

He said that the kinds of measurements to be used – such as recording whether cholesterol levels drop, blood-sugar levels are under control, and flu vaccines are provided to protect vulnerable people – “are things that we know are important. If you measure quality in that way, you get better results.”

Cantor, an NJ Spotlight columnist, noted that New Jersey has long been among the national leaders in healthcare spending without outcomes that match.

Now, an insurer that covers 3.7 million people aims to shift many of them to a lower-cost insurance alternative that ultimately promises to keep providers to a budget.

Cantor did note one possible risk in the switch: Providers may be inclined to reduce care in ways that could harm patients.

But the alliance includes safeguards, basing payments on quality measurements – including a measurement of whether patients are happy with the care they’ve received.

Problems for non-alliance healthcare providers

The repercussions for hospitals and doctors left outside the alliance could be significant, according to Cantor. He noted that the two factors that most people use to choose an insurance plan are cost and whether their provider accepts that insurance. If the cost is low enough, he said, some people will choose to sever long-standing provider relationships.

Laurel Pickering, president and CEO of the Northeast Business Group on Health, said she’s OK with that. Her organization represents employers concerned with the rising cost of healthcare. Its members include Horizon, as well as major New Jersey employers like PSE&G, Prudential, and Princeton University.

“It’s very positive,” that patients will be able to choose a lower-cost alternative, Pickering said. “I think, to be honest, that’s the whole point. We have to move how we pay doctors … The whole point is to start to migrate people to physicians who want to keep patients healthy and have that as their primary goal.”

Cantor said the alliance will be based on exclusive relationships, which means that Horizon won’t be looking to add more providers, while the providers won’t be entering into similar contracts with other insurers. This could present problems for small insurers like Health Republic Insurance of New Jersey and Oscar Health Insurance, which are unlikely to strike such favorable deals to attract customers.

Alliance providers contacted yesterday said it was a clear choice to link up with Horizon.

Dr. Jeffrey Le Benger, Summit Medical Group’s chairman and CEO, said the alliance’s approach is similar to how Summit has been operating for years, using measurements of healthcare quality to drive down costs.

Le Benger described a dynamic that is the exact opposite of traditional fee-for- service, which provides incentives for more spending.

The more “touches” patients have with Summit providers, the less money is spent, because their health is improving, he said.

Hunterdon Healthcare joined the alliance both because the approach to payments gelled well with its own approach, and because it didn’t want to lose patients, said Jeffrey Weinstein, executive director and CEO of Hunterdon Healthcare Partners, an organization partly owned by the system and part-owned by a local group of doctors.

“The people would have to go elsewhere for their care, and that’s not our goal,” Weinstein said, noting that Hunterdon is the only one-hospital system in the Alliance.

Hunterdon has a long history of using quality-based measurements to determine clinical decisions, from determining when to recommend that patients receive colonoscopies to encouraging immunizations.

“When opportunities like this arise, it’s part of our history, it’s part of our culture,” he said.

Inspira President and CEO John DiAngelo said the alliance furthers his system’s goal of being the region’s leading healthcare providers in all settings, while RWJ Health System President and CEO Stephen K. Jones linked the Alliance to a move “away from sick care towards keeping people well in their communities.”

However, while Cantor was largely enthusiastic about the concepts driving the Alliance’s formation, he also noted that there’s no guarantee that it will succeed.

“We have no idea how far this model, whether it’s Horizon or Medicare, … how far they’re going to take us toward lower costs and higher quality,” Cantor said. “We’re betting on a lot of ‘win-win solutions,’ and we just don’t know. A lot of these ideas are being tried for the first time. The theory is there -- I agree absolutely, moving from fee-for-service to value-based payments makes perfect sense,” but it may not drive down costs permanently.

The only thing proven to do that in other countries has been government regulation of prices, “and we’re not doing that,” Cantor said.

A final note, about the name: Marino said OMNIA is based on “omni,” the Latin root for “all.” Horizon spokesman Tom Rubino added that the term reflects the fact that the alliance will bring “all of the key stakeholders together to improve and transform healthcare.”

The name also went over well in market testing, and cleared legal hurdles since it wasn’t already owned by another business.

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