Seven health systems and physician organizations in Southeast Michigan have agreed to contract with Blue Cross Blue Shield of Michigan in January under "value-based" contracts that share risk and could provide additional revenue if they lower costs and improve quality.
But under an enhanced value-based contracting approach Blue Cross first began eight years ago, the new contracts — under the banner Blueprint for Affordability — could force provider organizations to refund payments to Blue Cross if annual total expenses for the covered patients exceeds targets, officials announced Wednesday.
To receive shared savings payments, healthcare organizations also must meet all of more than a dozen agreed-upon quality metrics. The contracts also limit the amount provider organizations can earn or lose from the program.
"Blueprint for Affordability is a transformative shift in the way we approach the management of healthcare costs," Daniel Loepp, Blue Cross' president and CEO, said in a statement. "This first wave of provider partners are true leaders in their industry — and courageous for stepping up and joining us in this bold new approach to promote quality and affordability."
Loepp said the Blueprint program seeks to "permanently change the trajectory of healthcare costs in Michigan and make healthcare more affordable for people and employers."
The four participating health systems 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 Physicians.
In a conference call Wednesday afternoon, executives of the provider organizations agreed that risk-based contracting is the wave of the future and that it promises to improve patient care and reduce healthcare costs.
Harpreet Cheema, Trinity's vice president of payer strategy and product development, said Blue Cross' Blueprint program is the next step toward achieving value for patients and employers.
"We have demonstrated success (in Medicare's risk-sharing programs) ... and have received dividends (from Blue Cross' current value-based programs," Cheema said. "We have comfort in that and the path of taking downside risk. ... We believe we can generate a fair return again."
Paul Castillo, Michigan Medicine's CFO, said it is natural to have concerns with a new reimbursement system. "We have confidence to manage care for patients we serve" in this arrangement because of success in similar Medicare accountable-care organization contracts, he said.
Mike Williams, president of United Physicians, said the more than 2,000 physicians who make up the independent physician organization do not have deep pockets as do major hospital-based systems. "We don't have the financial wherewithal to support huge sums of risk on the downside" if the group fails to meet financial targets, he said.
"We have been able to negotiate (successful) contracts" with Blue Cross and other payers in the past, said Williams, adding that the group feels comfortable with the new contract knowing that other healthcare organizations also are involved.