Michigan Blues expands risk-based contracting program to 14 health organizations

Blue Cross and Blue Shield of Michigan has added seven health organizations to its risk-sharing payment program, extending the insurer's Blueprint for Affordability program to providers in all parts of lower Michigan.

Designed to cut costs and improve quality, Blueprint began last December with seven major Southeast Michigan health organizations agreeing to participate in what is believed to be the state's first comprehensive "two-sided" shared risk program.

Under the five-year contracts, provider systems could gain additional revenue if they lower costs and improve quality, the so-called upside risk arrangement. But the 14 participating health organizations could be forced under the downside risk arrangement to refund payments to Blue Cross if annual total expenses for the covered patients exceeds agreed-upon targets.

"I am proud to welcome these provider organizations to our statewide partnership as we take a stand for quality and affordability in health care," said Daniel Loepp, CEO of the Michigan Blues, in a statement. "The power and value in Blueprint for Affordability comes from everyone joining together to challenge the status quo. Now throughout the Lower Peninsula, people will benefit from higher quality health care at costs they can better manage."

The second group of health organizations signing on to risk-sharing agreements with Blue Cross include:

• Ascension Michigan, including Genesys PHO, Flint, and St. Mary's PHO, Saginaw
• Trinity Health's Affinia Health Network, Grand Rapids area
• Great Lakes OSC, Midland area
• Holland Physician Hospital Organization, Holland area
• Munson Healthcare Clinically Integrated Network, Traverse City area
• Northern Physicians Organization, Traverse City area

These health organizations, accounting for about 9,000 providers, will join four health systems already in the program. They are Ascension Health, Warren; Trinity Health, Livonia; Henry Ford Health System, Detroit; and Michigan Medicine, Ann Arbor. The three physician organizations are United Physicians, Bingham Farms; the Physician Alliance, St. Clair Shores; and Oakland Southfield (Mich.) Physicians.

Steve Carrier, Blue Cross' senior vice president of network management and provider partner innovation, said the seven additional health organizations reached out to Blue Cross to participate in the program. He said the organizations have been participating in the Blues' physician group incentive program, or PGIP, which rewards physicians for improving quality and reducing unnecessary utilization.

"Independent physicians are looking for ways to be successful and increase their income by performance," Carrier said. "They (told us we) can win by doing this. We have a better mousetrap."

In 2020, Carrier said all 14 health organizations will be eligible for upside risk, which means they can get bonus payments for hitting various targets. In year two, he said, the downside risks will kick in and they could be subject to penalties. Blue Cross said the program is intended to be budget neutral.

"(The first group) are about two months into the program. So far, we have held training sessions to learn what to expect. We set up population health meetings," Carrier said. "It will take the first year to get things going."

Shay Raleigh, executive director of Great Lakes OSC, said joining Blueprint was the next step in streamlining care to patients. "We've made great progress toward coordinated care with our patient-centered medical homes, and we look forward to building on that success," he said.

Dr. Peter Sneed, president of Northern Physicians, also said coordinating care under PGIP has prepared it to participate in a larger value-based program like Blueprint.

"Our goal is to continue achieving the 'quadruple aim' of improved quality, reduced costs, improved patient experience and improving the joy of practicing medicine," Sneed said. "Our patients will be healthier and benefit from better outcomes and more manageable out-of-pocket costs."

Carrier said Blue Cross has heard from other health organizations and likely will add more systems this year, but they won't go under contract until 2021.

Mark Geary, a spokesman for eight-hospital Beaumont Health in Southfield, said Beaumont is studying the Blue Cross program.

"Blueprint is a true risk-sharing model," Geary said in an email. "We are carefully vetting and evaluating whether the program is ultimately in the best interest of our patients before we decide whether to participate."

Similar to Medicare "accountable care organization" and specialty physician two-sided risk models, providers share in the savings but are also responsible for some of the loss if spending is above the benchmark.

Experts believe two-sided risk arrangements will become the norm over the next decade.

A small number of health organizations have accepted downside risk arrangements, although the numbers appear to be growing.

In a recent analysis of Medicare ACOs, 33%, or about 200 of 600 ACOs, included downside risk arrangements in their contracts in 2018, up from 28% in 2012, according to a 2019 study in Health Affairs.

As encouraged by the Affordable Care Act, private and government payers have been attempting to move providers away from higher-cost traditional fee-for-service reimbursement system that rewards providers for higher utilization of services.

National studies have shown that 30% of healthcare spending either is wasteful, duplicative or unnecessary. U.S. healthcare costs are projected to rise 6% in 2020, up from 5.7% increases in 2019 and 2018, according to the PricewaterhouseCoopers Health Research Institute. Still, those numbers are far below the 12% increase in 2007 and 9% increase in 2010 before the ACA was fully implemented.

But because healthcare cost increases have failed to fall below the 5.5% low of 2017, employers and individuals feel more needs to be done to contain costs that far exceed salary growth.

Over the past few years, as payers have tried to use various methods to contain costs, including utilization review, prior authorization and high-deductible health plans, hospitals and physician organizations have been preparing to accept more value-based reimbursement arrangements.

Over the past 15 years, Blue Cross has used value-based reimbursement arrangements with hospitals and physicians to save customers more than $2.2 billion. At the same time, quality and outcomes have improved, Blue Cross said.

In addition, Blue Cross said the savings have led to at least nine premium reductions for small group customers over the past five years along with slowing of rate increases in the individual and Medicare Advantage markets.

Value-based care contracts are designed to reward providers for reducing hospital readmissions and unnecessary emergency department visits, eliminating duplicate and wasteful services and moving care to lower-cost outpatient settings, when appropriate.

With Blueprint for Affordability, Blue Cross is providing health systems and physician organizations with additional data to give them the tools they need to manage their patient populations more effectively.

In previous interviews, healthcare executives told Crain's they need more data to manage their patient populations, especially because patients don't always stay within their systems of care.

Blue Cross executives said the additional data and better patient care management will help providers costly tests, imaging, ED visits and hospitalizations.

The Blueprint risk-based program includes Blue Cross' PPO commercial members and Blue Cross' Medicare Advantage PPO members, which represent 30% of the covered population in Southeast Michigan, or hundreds of thousands of members with more than $4 billion in total costs of care in the region.

Healthcare providers can earn additional dollars in slightly different ways in the commercial and Medicare Advantage markets. In the commercial space, if the four hospital-based systems and three physician organizations hold down annual expenses in the commercial business below the statewide average of 4%-5% in 2019, they share savings on a 50-50 basis with Blue Cross, company officials said.

However, if costs exceed the statewide average, the healthcare organizations must pay back Blue Cross 50% of the excess amount, subject to loss caps.

Blueprint is intended to be revenue- and budget-neutral for Blue Cross as incentive payments to providers will equal refunded risk payments, although it may take a few years to achieve the balance. Providers will continue to be paid for services and procedures under Blue Cross' fee schedule. The risk-based program is in addition to the existing payments.

For commercial patients, Blue Cross has 14 designated quality measurement targets that health care organizations must hit to receive shared savings. Medicare Advantage patients have 14 slightly different quality measurements. The measurements could change in the future based on Medicare or Blue Cross priorities.

Commercial quality measurements are the following: appropriate testing for children with pharyngitis; appropriate treatment for children with upper respiratory infection; avoidance of antibiotic treatment in adults with acute bronchitis; breast cancer screening; cervical cancer screening; childhood immunizations; colorectal cancer screening; three diabetes-care metrics, including blood glucose controls; controlling high blood pressure; statin therapy for patients with cardiovascular disease; statin therapy for patients with diabetes; and use of imaging studies for low back pain.

For Medicare Advantage, quality measures include breast and colorectal screening, diabetes control, osteoporosis management in women, all-cause readmissions, rheumatoid arthritis management and statin therapy for cardiovascular disease. Four other measures are medication adherence for cholesterol, diabetes, hypertension and cardiovascular disease.

This article was originally published in Crain's Detroit Business.