Minnesota's Largest Health Plan Signs New 'Total Cost of Care' Contracts with Major Care Systems

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Blue Cross and Blue Shield of Minnesota

Nov 30, 2010, 10:56 ET

Blue Cross and Blue Shield of Minnesota Launches New Payment Model with Allina, Essentia, Fairview, and HealthEast

EAGAN, Minn., Nov. 30, 2010 /PRNewswire-USNewswire/ -- Blue Cross and Blue Shield of Minnesota (Blue Cross) today announced it has launched a new "shared incentive" payment model with four of Minnesota's largest care systems — designed to make health care more affordable and to improve the health status and quality of care delivered to its members. The state's largest health plan — with 2.7 million members — has signed agreements with Allina Hospitals & Clinics, Essentia Health, Fairview Health Services, and HealthEast Care System, which offer significant performance incentives to the care systems for achieving measurable improvements in affordability, quality, and the efficiency of care delivery.

The new contracting approach is a purposeful departure from the traditional health plan–provider relationship, which focuses on paying providers for the volume of care delivered to a health plan population — payment that is often renegotiated on an annual basis. The new approach is designed to create a longer-term, collaborative partnership approach where hospitals and clinics are rewarded for providing care that improves quality and utilizes resources effectively. The resulting quality improvements and cost-savings will benefit Blue Cross members and clients and the community in the form of measurable improvements in clinical and health outcomes, lower medical cost trends, and reduced premium increases.

"This new model rewards health care providers when they deliver high quality care and innovations in care delivery," says Patrick Geraghty, Blue Cross president and CEO. "Traditional payment models have fallen short of addressing cost increases and have only minimally addressed quality goals. We needed to take a closer look at the process and find a solution that keeps the focus on the great care for which Minnesota providers are known — and away from negotiations too focused on volume and rate levels."

In the shared incentive model, physicians, clinics and hospitals continue to get paid a basic rate, as in the traditional "fee for service" model. However, over the length of the agreement, the focus is less on guaranteed rate increases and more on incentive payments tied to measurable improvements in quality and to reductions in the overall cost of care. Care systems will be rewarded to be more efficient and effective and are rewarded for quality results in key areas. Blue Cross plays a key role in working with them to identify and address cost drivers and quality gaps by sharing data and trends that inform care systems practices. Some of the quality measures include improvements in care for chronic illnesses, including diabetes, heart disease and hypertension. Specifics of the agreements vary by care system — but all have the same core approach and focus on quality.

"We are moving to implement aspects of this new model in all of our provider relationships," says Jim Eppel, senior vice president of health management and commercial markets, Blue Cross. "One sign that this is a totally new approach is that physician leaders from Blue Cross and the care systems have been actively involved in the negotiations — creating the quality and patient outcome goals set out in the contracts. This new approach is not a traditional contract negotiation process, but rather a multi-year partnership model where the health plans and providers work to effectively share knowledge and manage risk in order to create value."

Care system leaders comment on the new payment model

Allina Hospitals & Clinics

"It's clear that the health care industry must move toward a model that places a premium on quality outcomes, maintaining health and providing excellent service," said Kenneth H. Paulus, President and CEO of Allina Hospitals & Clinics. "This partnership with Blue Cross does exactly that by paying providers like Allina for keeping quality high and costs under control. It's a big step in the right direction."

Essentia Health

"I'm really excited about the opportunity we have ahead of us," said John Smylie, Chief Operating Officer of Essentia Health. "I believe we can improve the patient's experience, improve the quality of their care, and do both of these at a lower cost. It's what our patients deserve."

Fairview Health Services

"Patients and payers are demanding greater value — that's why we've been working so hard to redesign the way we provide care," said Mark Eustis, Fairview president and CEO. "The good news is we're already beginning to see results demonstrating improved clinical outcomes, a better patient experience and reduced total cost of care. This is the right work. It's rewarding work and it's the work of the future."

HealthEast Care System

"Transparency around quality and costs and rewarding behavior focused on health, not just disease management, are essential components of effectively managing our state's health care costs," said Tim Hanson, Chief Executive Officer of HealthEast Care System. "We are pleased to be working with Blue Cross on new models that provide effective data to monitor and evaluate performance and that incent positive changes in quality and cost. The reform of our health care system is taking place in the private sector even more rapidly than by government payors."

Blue Cross and Blue Shield of Minnesota, with headquarters in the St. Paul suburb of Eagan, was chartered in 1933 as Minnesota's first health plan and continues to carry out its charter mission today as a health company: to promote a wider, more economical and timely availability of health services for the people of Minnesota. Blue Cross is a not-for-profit, taxable organization. Blue Cross and Blue Shield of Minnesota is an independent licensee of the Blue Cross and Blue Shield Association, headquartered in Chicago. Go to bluecrossmn.com to learn more about Blue Cross and Blue Shield of Minnesota.

SOURCE Blue Cross and Blue Shield of Minnesota