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Rochester General Health System and its affiliated doctors group, the Greater Rochester Independent Practice Association Inc., have finalized a five-year contract with Excellus BlueCross BlueShield that officials predict will change the shape of local health care.
The pact promises extra cash to GRIPA doctors who follow protocols designed to improve patients' health and slow increases in health care costs. RGHS CEO Mark Clement said it has been in the works since last fall when he and Excellus CEO Christopher Booth shook hands on an agreement.
The contract has been in effect as a working agreement since Jan. 1 but was adopted formally after Excellus, RGHS and GRIPA settled the final details some three weeks ago, Clement said. RGHS and GRIPA are negotiating with Schenectady-based MVP Health Care in hope of striking a similar deal.
The deal creates a provider organization structured along lines laid out in the Patient Protection and Affordable Care Act and in new rules being promulgated by the Centers for Medicare and Medicaid Services.
Accountable care organizations or accountable care networks are supposed to improve the quality of care while cutting costs. To hold such organizations accountable, the still-evolving rules call for provider payments to be linked to quality metrics.
RGHS and GRIPA might apply for federal designation as a Medicare ACO in 2014, Clement said.
Collecting and analyzing data to paint an accurate picture of provider performance requires sophisticated and costly information technology and highly skilled personnel.
Because of such demands, experts think only large and well-heeled organizations are capable of organizing and maintaining accountable care organizations and accountable care networks. They also believe ACOs or ACNs must big enough to realize economies of scale so they can operate efficiently.
Many regard consolidation of U.S. hospitals and health systems as inevitable because of those factors.
The final RGHS-Excellus agreement comes as RGHS and Unity Health System take the first steps to merge. Their marriage would create a local health care power rivaled only by the University of Rochester Medical Center. At the same time, RGHS and URMC are striking alliances with outlying hospitals and health systems.
The RGHS-Excellus contract also comes some four months after URMC started organizing its own ACN, Affordable Health Partners IPA LLC.
The RGHS contract initially applies to 110,000 area subscribers in commercial Blues plans whose primary care doctors belong to GRIPA. But GRIPA, a for-profit physician organization half-owned by its members and half-owned by RGHS, could grow and thus increase the reach of the agreement, said Joseph Vasile M.D., CEO of GRIPA.
GRIPA's 900 members include a mix of private practice doctors affiliated with RGHS hospitals, physicians employed by RGHS and doctors affiliated with Unity.
Affordable Health Partners has as its core some 1,000 URMC-employed doctors. It too is aggressively recruiting primary care doctors in private practices.
Asked if Excellus would like to reach an arrangement similar to the GRIPA contract with URMC's ACN, Booth said, "We're ready to talk to anybody up and down the Thruway."
The GRIPA contract does not eliminate fee-for-service care, the much-criticized reimbursement model that governs U.S. health care. Instead, it overlays a shared savings arrangement on the existing fee schedule.
Under the fee-for-service model, doctors and hospitals are paid a set amount for each procedure or office visit. That arrangement, which he expects to end eventually, rewards quantity of care but does nothing to encourage quality, said Clement, echoing long-standing physician complaints.
Nevertheless, the GRIPA pact leaves the existing schedule in effect, promising extra payments to doctors who follow recommended procedures and whose patients maintain or improve health.
"That changes the incentives," Clement said.
The contract also has an element of risk by putting a cap on the amount GRIPA doctors can spend each year. Terms call for the capped amount to increase annually by a percentage that tracks the increase in the medical consumer price index.
If the care ordered by GRIPA doctors over the course of a year comes in under the cap, the physicians share in the savings. If it exceeds the cap, they are supposed to help make up the overage.
Motivated by the carrot of financial reward and the stick of potential losses, doctors will make different choices in dispensing care, Clement said. But aside from the promise of monetary reward, he added, the contract's incentives encourage things doctors want to do but do not always find time for in a strict fee-for-service environment.
Savings GRIPA already has achieved show how a contract that pays doctors extra amounts on top of their customary fees can cut costs, Clement said.
GRIPA invested more than $1 million to build an IT system and improved cooperation among its physician members to win a clinical integration designation from the Federal Trade Commission. In recent years, it has added care managers to help its doctors track patients with chronic conditions.
GRIPA and RGHS "started this process six or seven years ago," Clement said. "We didn't know it then, but it turned out to be exactly what reform demands."
Beginning with RGHS' self-funded employee health plan, GRIPA struck deals with local self-insured employers including Paychex Inc., LiDestri Foods Inc. and Monroe County to provide health care. Its doctors treat some 30,000 patients in such plans.
Under GRIPA's care, Clement said, RGHS spending on employees' health care increased at a far slower rate than the national average.
For reasons experts are not sure of, the rate at which all U.S. health care spending is increasing has slowed in recent years. The slowing of the rate of increase in RGHS' spending has been more dramatic.
In 2010, the rate at which RGHS spending rose tracked the national average, with both going up 8 percent. In 2011, the national rate of increase was 7 percent while that at RGHS was 6 percent. In 2012, the average U.S. rate of increase was 6.7 percent but RGHS had a 5 percent rise. The average rate of increase in U.S. health spending so far this year slowed to 6.1 percent; RGHS has had a 2 percent rise.
"If the trend continues, we could be in negative numbers," Clement boasted.
In the now largely abandoned HMO model that dominated U.S. health care in the 1980s and through much of the 1990s, physicians also shared risk with insurance companies. But while HMOs initially seemed to wring savings out of the system, costs eventually resumed a sharp upward spiral.
Nancy Adams, executive director of the Monroe County Medical Society, concedes there are similarities but says current reform initiatives have a better chance of success because of developments such as technological advances that allow for better real-time tracking of care.
However, there could still be unintended consequences, she added.
As the still-forming RGHS and URMC physician organizations compete to enroll members, the area's primary care doctors in private practice will find the entreaties of one organization or the other impossible to resist, Adams predicted.
"They really can't afford to leave money on the table," she said, referring to the extra payments physicians could collect for following recommended protocols.
Increased competition between the systems could be an unintended consequence, however, Adams added. The systems could call on primary care doctors in the ACOs they build to join their organizations exclusively, directing patients to specialists and hospitals in their respective systems, she speculated.
Thomas Mahoney M.D., associate executive director of the Finger Lakes Health Systems Agency, concurred. If it encourages unneeded duplication of programs and services, greater competition between the major systems could to cut into the savings Clement expects, Mahoney said.
Excellus CEO Booth sees such outcomes as unlikely, however. There is room in the market for both systems, he said.
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