Blue Shield of California and integrated delivery system John Muir Health are partnering on an accountable care organization that will cover all 16,000 HMO Blues plan members who have chosen a John Muir primary care physician. The two are guaranteeing at least $5 million in savings for employer clients in the first year.

The project, which will launch July 1, will run for an initial three-year period. Blue Shield and John Muir say they expect the ACO will keep member health care costs almost completely level for the first year, while accounts should see small cost increases — well below trend — in the second and third years.

About 6,600 of the 16,000 HMO members who will be moved into the ACO are part of the California Public Employees’ Retirement System (CalPERS).

The initial annual targeted savings goals exceed $5 million, says Kristen Miranda, Blue Shield’s vice president of provider network management. Blue Shield and John Muir will give customers a premium credit equivalent to the targeted savings as part of the project, she says.

If plan expenses exceed the targeted budget at the end of the year, the clients still get the premium credit, and Blue Shield and John Muir will write off the difference, Miranda tells ABN. If expenses come in below the targeted amount, then Blue Shield will split the additional savings with John Muir’s separate physician and hospital organizations, she says.

ACO Uses Mix of Payment Systems

Since the project involves existing HMO patients, John Muir’s physicians already are receiving capitated payments, says Mitchell Zack, John Muir’s vice president of employer and payor relations. Miranda adds that Blue Shield’s ACO program “does not in general modify the ‘up front’ payment provisions in place with our ACO partners, so there is generally a mix of capitation and fee-for-service payment methodologies in place across our ACO partners.”

There’s no “poor quality” trigger under which no savings are shared, Miranda adds, but there are quality metrics specific to the ACO program and specific to Blue Shield’s pay-for-performance program, “and our risk share agreement incentivizes us to help each other hit those metrics.”

The quality metrics will need to target very specific care processes, Zack says, since there’s currently little room to improve performance on “easy” metrics, such as increasing the percentage of patients who receive recommended vaccinations.

“We’re already pretty good at that,” he tells ABN. “These are patients we’ve been treating for years.” Therefore, the health system is data-mining to determine opportunities for savings, he says.

John Muir ultimately will use a variety of different care process changes, including a mix of hospital-centric and provider-centric changes, to achieve those savings, Zack says.

He specifically mentions increasing the percentage of generic vs. brand-name drugs prescribed, but notes that “we’re still working through and developing a prioritized list, both inpatient and ambulatory.”

Data Review Drives Measure Selection

The primary goal will be to improve quality of care, which ultimately should save money, Zack says. For example, “we’re not saying ‘reduce bed days.’ We’re tweaking the process to make it higher quality.” Blue Shield and John Muir now are conducting a data review to pinpoint specific quality measures, adds Miranda.

The insurer has access to both claims and encounter data, which it can mine in an effort to enhance care, Zack says. Meanwhile, John Muir is instituting new predictive modeling software that will allow it to mine its own data more quickly and identify areas for care improvement, he says.

The ACO will not be structured as a separate corporation or an LLC, Miranda says. Blue Shield and John Muir’s hospital and physician organizations all will contribute operational personnel to an operational committee that deals with day-to-day issues and decisions involving the ACO, Zack says. That operational team will be responsible for “getting the resources necessary to make the ACO successful,” he says.

Meanwhile, a 15-member steering committee made up of the organizations’ leadership — including clinical leaders — will make major decisions, Zack says.

The ACO is the first for John Muir and the seventh for Blue Shield. However, because John Muir “is more of an integrated system than some of our other ACOs,” establishing the ACO structure should be easier and rolling out the program should be faster, says Miranda. “We hope that we will be able to leverage that organizational alignment to accelerate the work to some degree,” she adds.

Blue Shield Has Several ACO Projects

Blue Shield is no stranger to full-risk ACO agreements: In March 2011, the insurer announced it had formed a two-year, full-risk ACO with Brown & Toland Physicians Group and California Pacific Medical Center (a Sutter Health affiliate), and a second two-year, full-risk ACO partnership with Hill Physicians Medical Group, Catholic Healthcare West and the University of California, San Francisco (ABN 4/11, p. 1). In total, those two ACOs cover 26,000 HMO members of the San Francisco Health Service System.

This isn’t the first ACO program involving Blue Shield and CalPERS, either: The two have been partnering on an ACO pilot since January 2010 (ABN 9/11, p. 3). In total, Blue Shield has more than 100,000 members in its seven ACOs in Sacramento, San Francisco, the Central Valley and Orange County.

Meanwhile, John Muir is in talks with “a number of other managed care organizations regarding ACO collaboration,” Zack says. In addition, the integrated delivery system has applied to be a Medicare ACO, he adds.

© 2012 by Atlantic Information Services, Inc. All Rights Reserved.

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