Orange County’s larger hospital groups are continuing to dip their toes into the waters of accountable-care organizations.
Such structures bring hospitals, insurers and doctors’ groups together in an effort to cut healthcare costs through greater efficiencies while maintaining or improving quality standards.
Accountable-care organizations started to gain attention in 2010, when federal healthcare reform was passed and laid the groundwork for the establishment of such groups.
A recent example of their development in OC got started last July, when Hoag Memorial Hospital Presbyterian joined with Greater Newport Physicians IPA and San Francisco-based insurer Blue Shield of California on a three-year accountable-care project. It serves 11,000 Blue Shield HMO members in Orange County.
The trio is sharing clinical and case-management information, coordinating healthcare services, and aligning financial incentives in a bid to reduce costs and improve quality.
“Global Budget”
The arrangement involves what’s known as a “global budget” with a three-way sharing of risks, said Lindy Wagner, a Blue Shield spokesperson.
“The global budget consists of total expected spending for the care of a set population of members,” Wagner said.
The Hoag-Greater Newport-Blue Shield agreement has set a savings goal of $3 million in its first year, which will end in July.
“If we exceed the targeted savings, the partners share in the savings,” Wagner said. “The risk-sharing arrangement ensures that success is achieved by taking cost out of the delivery system, not by shifting risk to one of the other partners.”
It’s expected to see cost increases in the low single-digit range on a percentage basis over the subsequent two years. That’s well below the typical inflation rate for healthcare, and could be accompanied by improvements in care.
Current goals for savings include reducing the primary ces-arean section delivery rate, reducing emergency room visits, managing drug usage more effectively, and improving coordination of healthcare services, she said.
Wagner said that Blue Shield also continues to work with Orange-based hospital operator St. Joseph Health on another accountable-care project. The effort started in January 2012 and lasted for a year.
“We are currently in the process of developing the new agreement to continue the program,” Wagner said.
Irvine-based Monarch HealthCare, A Medical Group Inc. was one of the first doctors’ groups in the area to participate in an accountable-care organization.
Monarch is part of a group that works with Medicare, which is the federal insurance program for elderly Americans.
Monarch’s accountable-care organization plans to rely on electronic medical records and other data to determine the best and most cost-effective way of treating patients, Dr. Jay Cohen, the medical group’s executive chairman and president, said in an earlier Business Journal interview.
“The intention is to educate patients and educate their doctors of things that are best practices,” Cohen said, adding that the workings “really should be pretty invisible to the patient.”
Monarch is one of more than 30 medical groups around the country that are working with Medicare to rein in costs through accountable-care structures. Medicare is paying directly for healthcare that comes through accountable-care organizations.
Doctors and hospitals will get a share of any savings if 35 quality benchmarks are met.
Brookings
Monarch said in 2011 that it was going to create another accountable-care organization in partnership with the Washington, D.C.-based Brookings’ Institution’s Engelberg Center for Health Care Reform and the Dartmouth Institute for Health Policy and Clinical Practice in Lebanon, N.H.
Anthem Blue Cross, a unit of Indianapolis-based WellPoint Inc., had been scheduled to work with Monarch, but that was shelved.
Other hospitals are eyeing the possibilities of accountable-care organizations.
Fountain Valley-based MemorialCare Health System has said a health plan license could lead to its participation in one of the groups.
Companies that provide services to the healthcare sector are also getting involved in accountable-care organizations.
Quality Systems Inc., an Irvine-based healthcare software maker, has said it sees opportunity to sell to accountable-care organizations, many of which see costs to be realized by sharing clinical and case-management information and coordinating healthcare services.
Growth Potential
Quality’s products offer such services and already are used in about 25 accountable-care organizations nationwide, according to Chief Executive Steven Plochocki.
“About 11% of healthcare is currently participating in the development of an accountable-care organization and 72% plan future participation,” Plochocki said at a recent healthcare conference sponsored by JPMorgan Chase & Co. in New York.
The sector is going to see “an enormous” number of healthcare providers join accountable-care organizations over the next 24 to 36 months, he said (see related Q&A, page 26).
