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Illinois governor bypasses big hospitals for not-for-profits to pilot Medicaid programs


By Claire Bushey, Crain's Chicago Business
Posted: October 23, 2012 - 12:30 pm ET
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Illinois Gov. Patrick Quinn's administration passed over University of Chicago Medicine and the University of Illinois hospital to run pilot programs designed to cut Medicaid costs, picking six ventures mostly led by not-for-profits.

Mercy Hospital & Medical Center on the Near South Side and Nashville, Tenn.-based Vanguard Health Systems, which operates four hospitals in the Chicago area, also were not chosen among 20 total bidders in the first phase of a plan to enroll half of the state's 1.2 million Medicaid recipients into programs where providers share some of the financial risk of care.

Instead of such well-known hospitals, the winning bidders include a venture featuring two Chicago safety-nets, Norwegian American Hospital and Methodist Hospital of Chicago. Also among those chosen last week were ventures led by social service agency Heartland Alliance and non-profit Medicaid provider Family Health Network, state officials said.

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The winning bidders will receive three-year contracts to provide care in exchange for a fixed amount, also called a capitation fee, instead of traditional fees for services. The fixed fees will start after a transition period during which each bidder will care for up to 1,000 patients. Key terms of the agreements, including how many patients will be covered, must still be negotiated.

The absence of a major Chicago hospital is a sign of how the pilot programs emphasize prevention over hospitalization, said Dr. Anne-Marie Audet, vice president for health system quality and efficiency at the Commonwealth Fund, a New York-based health care research foundation.

“By funding these types of organizations, you're really going toward a new paradigm, that what's valued is health, not healthcare,” she said.

In making the selections, the Illinois Department of Healthcare and Family Services wasn't avoiding hospitals, but simply wanted to try different approaches, HFS deputy administrator Jim Parker said.

Coordinating social services beyond those covered by Medicaid was an important criterion for the state's request for proposal, which was issued in January.

Under a 2011 law passed by the Illinois General Assembly, half of all Medicaid recipients must be in risk-based, coordinated care programs by 2015.

The six winning bidders, including two from downstate, will largely focus on patients with disabilities, mental illness or substance abuse issues. The winning bidders are:

• Be Well Partners in Health, a venture that includes an affiliate of MADO Healthcare Centers, which operates five residential health care facilities in Chicago, as well as Norwegian American, Methodist Hospital and Bethany Methodist Communities. Be Well will focus on patients on the North Side;

• Together4Health, a group led by Heartland Health Outreach, which will focus on adults and senior citizens in Cook County;

• Dolton-based Healthcare Consortium of Illinois, which will focus on seniors and eligible members of their families on Chicago's South Side;

• A subsidiary of Family Health Network, which will focus on senior citizens and adults with disabilities, including mental illness, throughout the Chicago metro area;

• The foundation that operates Trinity Medical Center in Moline, about 165 miles west of Chicago, which will serve patients in nine counties in northwest and central Illinois;

• Macon County, which is 180 miles south of Chicago, will focus on adults with mental illness and senior citizens with chronic disease.

Losing bidders could still be added over the next six months.

Nicole Kazee, director of health policy and programs at University of Illinois Hospital & Health Sciences System, said the university was disappointed it was not selected for the initial launch.

U of I officials plan to meet with HFS officials to retool the university's proposal for the second wave of announcements, expected in April. Meanwhile, the hospital will be one of the 37 providers in Heartland's proposal.

At the start, five of the six pilot programs will be a hybrid of payment types, with networks receiving a per patient per month fee for coordinating care as well as a fee for health care services rendered.

The coordination fee could be $100 or more per patient per month, Mr. Parker said.

“So you're paying $1,200 per person in the year,” he said. “If you can avoid just one hospitalization, you come out way ahead.”

Those programs will eventually move to fixed capitation fees. The venture sponsored by the Family Health Network will be the only pilot program to receive a fixed fee from the start.

The programs proposed by Heartland Health and MADO-Norwegian American expect to save about $11 million over the course of three years, executives said.

The not-for-profit groups are already serving these populations, while many hospitals haven't traditionally gone after Medicaid patients, said Tom Wilson, community development organizer Access Living, a Chicago-based non-profit that's part of the Family Health proposal.

“They tend to look at Medicaid patients as someone they're losing money on," he said

A spokeswoman for Mercy said she was unaware of the hospital's proposal. Representatives of Vanguard and U of C Medicine did not return messages to comment.


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