New Anthem network makes business case for HMO-ACO hybrid

Anthem Blue Cross Vivity, the newly announced joint venture among WellPoint subsidiary Anthem and seven prominent Southern California providers, will blend both the past and future as its planned HMO-like structure also looks to implement elements found in today's accountable care organizations.

Vivity will walk and talk like an HMO, a type of health plan that rose to prominence in the 1990s but fell out of favor due to limits on which doctors and hospitals patients can see. HMOs offer far less coverage for patients who go to providers that fall outside of their networks. But they are also designed to be cheaper for patients, who only have to worry about a monthly premium and copayments rather than deductibles.

Vivity will offer premiums that are “lower than what exists on the market today,” said Anthem Blue Cross West Region President Pam Kehaly during a news conference Wednesday. Patients also will be responsible for moderate copayments, but deductibles and coinsurance will be waived.

However, Vivity will also hold a structure similar to ACOs, which were created for the Medicare program under the Patient Protection and Affordable Care Act. ACOs are incentivized to reduce costs and improve quality by sharing in savings that result from better patient care coordination.

Vivity providers and Anthem will divide all profits or losses, giving each skin in the game to effectively manage patient care. The plan will use a capitation model, essentially assigning a fixed per-member per-month figure to each beneficiary. Administrative costs and other expenses will be subtracted from the premium risk pool, and if costs are kept in check, all the founders will see profits.

Barry Arbuckle, CEO of MemorialCare Health System, a five-hospital system based in Fountain Valley, Calif., that is part of Vivity, told Modern Healthcare the health plan originated with a “desire to bring ACOs to the next level.” But he said it's difficult to compare this entity with another ACO.

He also emphasized that quality metrics are at the heart of how providers will get paid. Reimbursement will be risk-based, meaning payment will depend on how well systems perform in certain quality measures, which have yet to be determined. As a comparison, Medicare's ACOs track 33 different quality metrics, such as readmission rates and how well diabetes is controlled.

“It couldn't just be all about money,” Arbuckle said. “It had to be about quality.”

Initially, Vivity will only be offered to large employer groups. The California Public Employees' Retirement System, a group that negotiates health benefits for state employees and is one of the largest purchasers of health coverage in the county, has signed on. Some of the participating hospitals are considering offering the plan to their employees as well.

What is still somewhat unclear is how regulators will view the deal. Executives said they involved legal experts and the federal and state government along the way. That's a good start to avoid antitrust scrutiny, said Rich Feinstein, a partner in the Washington practice of Boies, Schiller & Flexner and the former director of the Federal Trade Commission's Bureau of Competition. While it's possible state and federal officials will still want to understand more terms of the deal, it also helps that CalPERS, with 220,000 members in LA and Orange counties, has already agreed to offer the plan to its members.

“When you have buy-in upfront from people who are presumably going to be the beneficiaries, those are all positive signals from an antitrust perspective,” Feinstein said.

Bill Berlin, a Washington-based antitrust attorney with Ober Kaler, says these types of “horizontal integrations” require evidence that other payers are losing access to the providers in question. But ACOs and other similar types of joint ventures have often been exempted from antitrust review in part because the federal government has closely managed and promoted some of these types of partnerships.

“This is the type of collaboration that certainly the Affordable Care Act and the concepts of healthcare reform in general are encouraging,” Berlin said.

Each of the eight healthcare organizations has invested undisclosed sums to fund Vivity, and the plan has also been licensed as a limited liability company, Kehaly said. Vivity will offer 6,000 doctors and 14 hospitals in its network. It expects to start marketing to employers with 50 or more employees Oct. 1 and coverage will start Jan. 1, 2015.

Follow Bob Herman on Twitter: @MHbherman