“We've all done this before, we just haven't done this together,” said Craig Leach, president and CEO of Torrance Memorial Health System.
Vivity will offer CalPERS' 210,000 members in Los Angeles and Orange counties access to health systems “that frankly, from a price perspective, would not have been available” without adding $100 per month to premiums otherwise, said Ann Boynton, deputy executive officer for benefit programs, policy and planning at CalPERS.
Nonetheless, Vivity's success likely will depend on targeting the high-cost care delivered in hospitals, something which can threaten hospital margins. Providers said existing capitation in California's market has spurred many cost-saving transformations that prepare them to benefit under the Vivity HMO.
“That is a pretty bold play,” said Leemore Dafny, former deputy director for healthcare and antitrust with the Federal Trade Commission and professor at Northwestern University's Kellogg School of Management. “It's not obvious how they're going to reduce hospital occupancy and come out on top.”
Vivity executives said reduced spending will come through special negotiated rates for hospital care and efforts to more closely manage where patients get care. “Prices are irrelevant in this conversation,” said Stephen Ralph, CEO of Huntington Memorial Hospital.
Thomas Priselac, CEO for the Cedars-Sinai Health System, and Dr. David Feinberg, president of UCLA Health, were unavailable for comment.
Pam Kehaly, president of Anthem Blue Cross' West Region, said Vivity partners will have many consolidation opportunities for reducing costs, such as operating a single nurse-call center for members. It also will be critical to direct patients to the most cost-effective setting across Vivity's network of ambulatory-care centers, community hospitals and academic medical centers.
That ability to manage across lower- and high-cost settings will be critical to academic centers' success in this and other accountable care initiatives. “The idea is to provide the right care in the least restrictive setting,” said Dr. Scott Berkowitz, medical director of accountable care for Johns Hopkins Medicine and executive director of its ACO.
But to manage that care, the partners will have to overcome many organizational and cultural differences. “There are seven different ways of doing things” among the systems involved, said Steve Valentine, president of the Camden Group, a Los Angeles consulting firm.
Follow Melanie Evans on Twitter: @MHmevans