One of Michigan's largest health systems has entered its first insurance contract to pay hospitals based on performance, not volume, a move that underscores the industry's halting progress toward financing reform that is widely cited as essential to more affordable healthcare.
Beaumont Health System, based in Royal Oak, joins a growing number of hospital operators with contracts that tie bonuses to performance on quality, health spending growth or both. Some hospitals entered risk-based contracts before the 2010 Patient Protection and Affordable Care Act, which included policies to promote financing reform. Adoption has accelerated since, but unevenly, and results so far have been mixed. Some contracts offer larger potential bonuses but also include penalties if performance falls short. The risk of failure has sidelined some hospitals, as executives wait to see how others fare.
Beaumont took a “relatively slow” approach, said Dr. David Wood, the system's chief medical officer. The new contract comes after strategic preparation for new reimbursement models, such as the system's 2013 agreement to clinically integrate with a large independent physician group.
Executives did not doubt that health reform and the marketplace would shift hospital payment toward more risk-based contracts, Wood said. But with no experience and potential financial risk, Beaumont executives decided to first work toward better coordination with physicians, which would potentially achieve the quality and savings targets that risk contracts require.
Last year, Beaumont entered into an agreement with local physicians to work more closely on quality and efficiency to prepare for new payment models.
The new risk-based contract with Blue Cross and Blue Shield of Michigan is Beaumont's initiation into payment models that will become far more common in coming years, Wood said. Follow Melanie Evans on Twitter: @MHmevans
Illinois Gov. Pat Quinn last week unveiled a five-year plan aimed at restructuring healthcare delivery and payment processes in the state's Medicaid program.
The plan aims to increase access to community-based health providers while reducing health costs. It will place a stronger emphasis on addressing social determinants identified as adversely affecting health outcomes for lower-income populations.
Called the “Path to Transformation,” the $5.2 billion plan is due to be submitted as a federal 1115 waiver application for CMS consideration.
“Illinois has made tremendous progress in recent years reforming and improving our healthcare system to control costs and deliver better quality care,” Quinn said in a written release. “This plan will help take our healthcare system to the next level—improving the health of people and communities across Illinois while significantly lowering our long-term costs.”
Some of the proposed initiatives within Illinois' Medicaid demonstration include an expansion of risk-based, managed-care plans, as well as an increase in public health campaigns that focus on positive lifestyle changes such as tobacco cessation and healthier eating.
The plan would establish a statewide health information exchange where healthcare providers throughout Illinois would be able to share clinical and administrative data on Medicaid patients. The demonstration also would advocate for establishing supportive housing for Medicaid patients and expansion of behavioral health services and supports.
The overall goal of the project is to create a system that does a better job of coordinating care for the burgeoning number of Medicaid enrollees now covered through the Patient Protection and Affordable Care Act. The state projects that an additional 500,000 Medicaid beneficiaries will be enrolled in the program by 2017.
The plan is scheduled to be submitted to the CMS on March 12.Follow Steven Ross Johnson on Twitter: @MHsjohnson