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."