In a first for Michigan, Henry Ford Health signs direct contract with GM

Henry Ford Health System in Detroit has signed a direct contract to provide a wide range of healthcare services with up to 24,000 salaried General Motors employees and their dependents in Southeast Michigan.

The direct contract with GM is the first of its kind in Michigan. Only about 3 percent of self-insured companies nationally have some form of direct contracts with providers, said the National Business Group on Health.

But a growing number of large self-insured employers—Boeing, Walmart, Lowe's, Whole Foods, Disney and Intel—have found that one sure way to reduce employee healthcare costs and improve service is to cut out middle-men health insurers and develop with integrated healthcare delivery systems that share cost savings and pay based on value.

Under the five-year contract for GM ConnectedCare, Henry Ford must hit an annual financial budget and will be held accountable for hitting key quality, cost and utilization of services metrics on a wide range of services, said Bruce Muma, M.D., chief medical officer and interim president and CEO of Henry Ford Physician Network.

Metrics include targets for customer service, preventive care, such chronic conditions as heart disease and diabetes and ER visits, Muma said.

Though Henry Ford Health was established in 1915 by Henry Ford, founder of Ford Motor Co., the health system has no current connection with the rival automaker.

ConnectedCare with Henry Ford is available for GM salaried employees during open enrollment starting in October with coverage to begin Jan. 1. Eligible employees and dependents will be covered in Wayne, Macomb, Oakland, Washtenaw, Livingston, Lapeer and St. Clair counties. The plan is not being offered to union employees.

Blue Cross Blue Shield of Michigan will be the contract's third-party administrator, processing and paying for claims and services and auditing data for reconciliation of shared savings at the end of each year under the PPO contract, Henry Ford and GM said. A key difference is that GM and Henry Ford will use pricing they have agreed on, rather than Blue Cross network pricing.

If Henry Ford stays under total annual cost terms and hits 19 agreed-upon metrics, the six-hospital system will split the savings with GM. If those targets are not reached under the risk-based contract, Henry Ford could lose money.

Sheila Savageau, GM's U.S. healthcare leader for global compensation and benefits, said the auto company decided nearly four years ago it needed to create a new contracting paradigm that moves away from fee-for-service medicine and encourages quality and value-based care.

Working with Blue Cross on two other PPO contracts it offers its employees, GM had been able to hold down annual cost increases to between 2 percent and 4 percent. GM anticipates a 10 percent savings over the five-year life of the contract for the company and employees, she said.

Savageau said GM told Blue Cross it planned to offer a direct contract to one or more health systems in Southeast Michigan for 2019.

"Blue Cross has been a really good strategic partner. I told them three years ago to get on board with value-based contracting. They weren't there yet. They were more fee-for-service, so we decided to look for a direct contract with one of the health systems in Southeast Michigan," Savageau said.

Over the past three years, Blue Cross has moved aggressively to sign value-based contracts with large health systems. Blue Cross now contracts with about 80 percent of hospitals in Michigan under value-based arrangements, Helen Stojic, director of corporate affairs with Blue Cross.

Stojic said Blue Cross' administrative services organization arrangement with GM and Henry Ford is the insurer's first direct contract between an employer and provider.

"We support innovation in healthcare," Stojic said. "When they brought it to us, we were willing to do that. It is a different design. It will be interesting to see how it develops."

Muma said Henry Ford responded to a GM request for proposal in the spring of 2017. "They had a pretty broad net to find a partner," he said. "We have had a really productive relationship talking with GM for more than a year. We want to try new things and be innovative."

GM issued an RFP to all health systems based in Southeast Michigan, Savageau said. Three finalists were chosen, including Beaumont Health and Ascension Michigan, according to a source knowledgeable about the process who asked for anonymity. Henry Ford won out.

Savageau said it is possible GM will add other health systems in direct contracts in future years to give employees more options. Beaumont declined comment and Ascension did not respond on deadline.

"We are still talking with the other two systems. We were very transparent on the criteria they need to meet," Savageau said. "Henry Ford has been doing value-based payment models for seven years. We first thought we might do two direct contracts. But now we might do more."

Advantages for GM with direct contracts include giving the company more control over health benefit design and the potential to lower costs of care. Providers also have more flexibility to order the tests or deliver specialty care they believe is necessary for a patient's treatment without having to negotiate through insurance company red tape, also called prior authorization.

Lower costs for GM also are a major advantage, said Savageau, but a lot depends on Henry Ford hitting the value-based targets and employees following physician advice and staying within the narrow network, she said.

"We have a cost-share philosophy, so any savings we have will be shared with employees," Savageau said. Under the health benefit structure, GM pays for about two-thirds of costs with employees paying for one-third, she said.

ConnectedCare will be the third plan option for salaried GM employees. The other two options are also high-deductible health plans with health savings account plans based on a PPO network.

"This (Henry Ford) option is the same plan design as the other two (Blue Cross options). The key difference is the monthly contribution they pay. It is the lowest-cost option," Savageau said.

Stojic said GM's other two plans are Blue Cross products and also have value-based components that seek to improve quality and lower costs.

"We have been making a lot of progress with value-based contracts," she said. "It is a learning process with the hospitals. It changes the dynamic with partners moving from fee-for-service to more value-based measurements."

Savageau declined to state the monthly premiums to employees for the three plans, but said ConnectedCare would be $300 per year less expensive for employees than GM's basic plan with Blue Cross and $620 less than the more expensive standard plan with the Blues. For family enrollees, ConnectedCare will be $860 less than the basic plan and $1,980 less than the standard plan, based on higher deductibles, copayments and co-insurance.

There are other incentives for employees to choose the Henry Ford plan and stay within its network.

Under ConnectedCare, the deductible for a single GM employee will be $1,500 with a 10 percent co-insurance for in-network, or "tier one" coverage with Henry Ford and other designated providers. Going out of network in "tier two" coverage would increase the co-insurance to 30 percent, a much higher cost than GM's other two plans.

Overall, GM employees will have their choice of more than 3,000 providers in the ConnectedCare network, including Henry Ford employed and affiliated doctors and other providers who are needed to round out specialty services. Those services under the plan will include primary care, hospital, emergency care, behavioral health and pharmacy.

GM and Henry Ford projects 20 percent to 25 percent of GM's 24,000 eligible employees and dependents will sign up for the Henry Ford program the first year. Muma said he believes 50 percent will be covered over time.

"GM has limited the first year to selective ZIP codes in the seven-county (Southeast Michigan) area," Muma said. "That does not include Henry Ford Allegiance (in Jackson) now, but is where they want to start. We imagine over five years, the product could grow in scope."

Over the past several years, Henry Ford has been building out is delivery network in Southeast Michigan and extending out to Jackson with Allegiance Health and up to Flint by adding HealthPlus of Michigan insurer. With the direct contract, Henry Ford has the opportunity to leverage the investment it has made over the years in its five acute-care hospitals, three behavioral health centers and more than 200 ambulatory care sites, including retail eye clinics, the company said.

"One of the greatest challenges was how to build and maintain geographic access sufficiently when don't have all the doctors and hospitals in the market," Muma said. The RFP required Henry Ford to meet a minimum access standard that included ambulatory care, physicians and hospitals.

"We have the Henry Ford Physician Network that includes 2,200 or 2,300 physicians, including 1,400 employed doctors through the medical group," Muma said.

Muma said the objective is to have all physicians participating in the contract and sharing financial risks through the clinically integrated network. But there are two subspecialty areas where Henry Ford needed help: pediatrics and behavioral health, he said.

Savageau said Henry Ford has a gap in care without a pediatric hospital. Through Blue Cross' PPO network, GM employees have the option to use DMC Children's Hospital for inpatient care and pediatricians affiliated with University Pediatricians to supplement Henry Ford's own pediatricians.

"We are partnering with Children's Hospital to fill out our pediatric network," said Muma. "We have referral and care coordination relationships with them now."

Some of the UP pediatricians are on the faculty of Wayne State University School of Medicine and some are independent pediatricians. University Pediatricians was formerly a clinical affiliate of the medical school. Now it is more closely aligned with Detroit Medical Center, a for-profit hospital owned by Tenet Healthcare Corp of Dallas.

"University Pediatricians will be paid as they currently are as part of the (Blue Cross) network," said Savageau, adding they are tier-one providers. "There is no additional discount and no direct contract between GM and University Pediatricians nor Henry Ford and University Pediatrics."

Muma said there will be clinical integration with UP doctors and Children's Hospital, but the exact details on financial and risk sharing arrangements haven't been worked out. "We will coordinate care as we always have with them," he said.

Savageau said GM also will have a separate carve-out contract for behavioral health services and will use Henry Ford doctors and facilities as part of the network. She said the behavioral contract hasn't been signed.

But Muma said Henry Ford will provide "almost all the care management functions for this population, to help guide and coordinate care."

Also excluded from coverage under the Henry Ford direct contract is dental and vision services, which will be provided separately Advanced burn care also would be referred out of the network to the University of Michigan Health System, Savageau said.

One challenge to direct contracts that set annual spending goals is out-of-network care. GM employees will pay lower co-payments and have more streamlined services using Henry Ford and accessing the system's MyChart electronic medical record. MyChart allows patients to access virtual visit options at certain clinics, view test results, message their doctor, request prescription refiles and pay bills.

But GM employees that opt for the Henry Ford PPO also can go out of network, if they wish, for higher out-of-pocket costs — but still higher costs to GM.

"They have better options and lower costs inside the network, but we can track them if they go outside," Muma said. "It will cost us more if the patient goes out of network because it will be less efficient care. Our finance people tell us the dollar amount spent from any service will hit the pool the same way, but it will be more expensive than inside because it will be less coordinated and less informed" by electronic record system.

Beyond lower cost to GM, Muma said patients will have a better health care experience using the Henry Ford network.

Muma said Henry Ford has developed a good track record on profitability, delivery quality and efficient services so far with their multiple value-based contracts. "We've had another positive year with our (accountable-care organization) program with Medicare. We have built a lot of confidence with shared savings," he said.

The contract with GM is very similar. It sets an annual total spending per member per month, modified by expected inflation rate and meeting the 19 quality, cost and utilization metrics.

"We will have an 18-month baseline period that will set the total costs of care for the remainder of the contract," Muma said. "Blue Cross will adjudicate the contract. If we score above the thresholds of the target, (the financial reward) shifts to our favor. If below, then the shared savings move away from us."

Some of the specific 19 metrics include targets for readmission rates, hospital-acquired infections, complications, blood pressure, colon cancer screening and diabetic control. "We will track utilization and ER visits, admission rates to reduce unnecessary hospital stays, obstetrical measurements to improve deliveries," Muma said.

Muma said the employer-based commercial population is typically lower cost than the Medicare population because utilization is lower. However, the key to reducing costs will be to identify patients with the highest risks based on chronic disease or lifestyle, design care management programs for them and treat them proactively to avoid costly and debilitating illnesses.

Henry Ford will closely monitor GM employees' health outcomes, but it will also measure overall customer satisfaction.

"That's one of the aspects that really excites us about a direct to employer arrangement like this, William Conway, M.D., CEO of Henry Ford Medical Group, said in a statement. "It's a new and unique way to both partner with our patients and to hold ourselves accountable, not just for their health, but also for their level of satisfaction with what we're doing."