California ACOs prove savings

December 1, 2013

Blue Shield of California ACOs report 3% trend

Blue Shield President and CEO Paul Markovich says he’s seen just about every variation of payer-provider contract deemed an Accountable Care Organization. But he believes an arrangement cannot be called an ACO unless it changes care on the ground.

Paul Markovich“Anyone can sign a contract, anyone can put together a network, and anyone can add a bonus scheme for reimbursement on top of what physicians get paid,” he says. “And those things can be incrementally helpful ,and those are good things to do. But if you’re not on the ground making changes in how a member is engaging in their health, how a physician or hospital or clinician is treating that member, if you’re not making changes from the way the world works today on the ground, then ultimately the odds are you’re not adding a whole lot of value.”

He looks for ACOs that are making changes in delivery, member behavior and provider behavior.

For example, Blue Shield created an accountable care model with Dignity Health, the largest hospital system in California and Hill Physicians Medical Group, an independent physician association in Northern California with 3,800 PCPs and specialists. The ACO covered 41,000 public employee retirees and included shared risk as well as shared savings for Blue Shield and the providers.

According to an analysis by Milliman, the pilot resulted in $15.5 million in cost savings and reduced per-member costs by 10% in the first year, compared to the population not served by the ACO. Readmissions also fell 15%. In year two, savings amounted to $37 million, and the two-year compound annual growth rate per-member, per-month was approximately 3%, significantly less than the trend for providers outside of the ACO arrangement.

Savings were attributed to declines in inpatient lengths of stay and 30-day readmission rates.

The underlying payment mechanisms were not changed. A global per-member, per-month target was used to determine shared savings and losses. Most significant was the providers’ willingness to work with Blue Shield in partnership rather than as adversaries across the bargaining table. Because all the partners had a significant financial incentive to reduce healthcare expenditures, they were inclined to help each other.

Blue Shield provided information technology integration to help the providers track progress and create more comprehensive views of their patients. With the data and clearly assigned members, the ACO partners were able to coordinate care.