One experiment to revamp how hospitals and doctors are paid has won converts at the Carilion Clinic, where executives are negotiating with insurers to boost quality and curb costs for a share of the savings.
Carilion's new pay way
Clinic one of five volunteers for payment pilot
The Roanoke, Va.-based health system is one of five that have volunteered for a health payment reform pilot project sponsored by the Dartmouth Institute for Health Policy and Clinical Practice and the Brookings Institution Engelberg Center for Health Care Reform.
Carilion, which owns six Virginia hospitals and manages another, became the first to go public with the pilot, which its architects say is designed to give hospitals and doctors incentives to cut waste and improve quality by offering providers a financial stake in the results. Other systems in Arizona, Iowa, Kentucky and Vermont have agreed to the experiment but have not yet been announced.
Carilion Clinic President and CEO Edward Murphy said how payment to the system will change under the pilot—for medical care and any bonus based on quality and cost-control targets—has not been determined, and it will depend on negotiations with commercial health plans.
By negotiating bonuses that hinge on targeted quality gains and slower spending growth, revenue won’t be as dependent on the sheer number of office visits, surgeries and diagnostic tests, which is how insurers now pay hospitals and doctors, Murphy said.
Under health plans that pay more for more care, hospitals and doctors stand to lose money on costly preventive medical care that keeps people healthy and helps patients manage chronic conditions to stay out of hospitals, he said. “You run the risk of your expenses going up and your revenue going down,” Murphy said.
Under the pilot, Dartmouth Institute will give private insurers a method for identifying patients who primarily receive care from Carilion’s hospitals and employed and affiliated physicians. Insurers will be able to calculate the cost to care for those patients and how quickly their expenses grow from one year to the next. Carilion and insurers will then identify quality and cost targets that slow the rate of spending and set a bonus based on whether Carilion reaches the goals.
The Dartmouth Institute researchers will also use a list of nearly 900 doctors provided by Carilion to identify Medicare patients treated primarily by the clinic, a list that includes about 575 primary-care and specialty physicians employed by the clinic.
However, Medicare doesn’t allow for bonus payments that are central to the pilot of what policy experts at Dartmouth, Brookings and elsewhere call “accountable care organizations.”
Julie Lewis, director of health policy for the Dartmouth Institute, said one healthcare overhaul bill includes legislation to allow such bonuses. One estimate by the Congressional Budget Office projected such incentives could lower Medicare spending by $5.3 billion between 2010 and 2019.
Widespread adoption of such arrangements face other potential regulatory, legal and practical challenges as well, Dartmouth and Brookings researchers wrote in the journal Health Affairs in January, including the large number of doctors who practice in small groups, public concern that incentives will limit access to needed care, and laws that seek to prevent abuse of referrals and payments among hospitals and doctors.
Mark Werner, Carilion’s chief medical officer, said that system executives hope to launch the pilot in January and roughly 60,000 to 80,000 patients will be included. He said he believes Carilion’s electronic health record and employed physicians will allow the system to better coordinate care to achieve the quality and cost targets. The pilot won’t alter Carilion physicians’ compensation, he said.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.