Blue Shield of California, CHW and Hill Physicians Create ACO for Retired California State Employees

Earlier this year, Blue Shield of California, Catholic Healthcare West and San Ramon, Calif-based Hill Physicians launched what is essentially an accountable care organization to manage the care of more than 40,000 members of the California Public Employees' Retirement System. The goal of the integrated delivery model is to keep healthcare costs flat in 2010, and it plans to do so by sharing clinical and case management information to better coordinate care.

A vision for coordinated care
The history of this integrated delivery model dates back to 2007 when Blue Shield of California, Hill Physician sand CHW began discussing ways to attack what they saw as a "disjointed delivery system," says Juan Davila, senior vice president for network management at Blue Shield of California. Specifically, the organizations wanted to develop a system that would reward physicians for quality and efficiency rather than utilization and break down silos among the health plan, hospitals and the medical group, he says.

Announced in April 2009, the pilot went "live" in January of this year. More than 40,000 CalPERS members who were covered through the Blue Shield HMO and who already had a primary care physician affiliated with Hill were automatically enrolled in the program.

The goal of Blue Shield's involvement is to "share risk with providers, not shift risk to providers," says Mr. Davila. He adds that simply shifting risk to providers would not be sustainable over time, and the goal of the ACO is to "take as much cost out of the delivery of care as possible, not just shift cost within the system."

Identifying unnecessarily high costs

An initial goal of the ACO was to identify areas where costs were unnecessarily high, thereby identifying areas to focus resources and implement solutions to bring costs down. "These insights would not have been possible without the collaboration required under the ACO model," says Mr. Davila. The groups identified the following three areas of unnecessary costs in which to focus their efforts:

1. Overutilization of certain elective procedures. The ACO identified hysterectomies and elective knee surgeries as the biggest cost drivers in the region among CalPERS members. While some patients may require these procedures, a cost-effective approach to treatment encourages that all possible non-surgical treatments be exhausted before the patient undergoes surgery. As a result, Hill and CHW are collaborating on alternatives, including evidence-based approaches to therapy and the treatments that should be pursued before recommending surgery, says Mr. Davila.

2. Preventable readmissions. According to Mr. Davila, studying data from all three organizations allowed the groups to more efficiently address preventable readmissions. "When we discover patterns of readmissions we are quickly conducting intensive examinations of the service line, inclusive of educating the caregivers, implementing more integrated discharge planning and other measures," he says.

3. Out-of-network services. Because out-of-network services are high-cost for commercial insurers, the ACO initiated a program to identify patients that have gone out of network and bring them back in, says Mr. Davila.

Challenges and key learnings

One of the biggest challenges for the development of any ACO is likely to be creating systems to share data, and this was not different for the CalPERS pilot. "Among the biggest challenges was establishing data connectivity and ensuring that everyone had access to the same data," says Mr. Davila. "There's also the obstacle of trying to bring about change as we look to overcome cultural differences, put in place different processes and the like. Engaging the member to actively participate in their health to realize cost savings is another challenge."

Mr. Davila says he is encouraged by the strong commitment all the organizations in the CalPERS pilot have had to working together to bring down costs, but notes that incentives have to be aligned in a way that keeps all parties engaged. He sees the ACO model growing more popular across the country, and notes that Blue Shield currently has five other potential ACO pilots in the works. "[Integrated delivery models allow] organizations the experience and expertise to implement payment reforms envisioned by the health reform law, including ACOs and episode-based payments," he says.  

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