Several Blue Cross and Blue Shield plans have announced accountable care organization (ACO) partnerships with providers in recent weeks, increasing the amount of payer participation in the coordinated-care marketplace. These commercial ACOs involving Blues plans are popping up across the country, demonstrating a variety of ways health plans can take part in systems created for cutting costs through improved patient care, market observers tell The AIS Report.

The movement by insurers to get active in the ACO arena is not peculiar to just the Blues, says William TenHoor, president of TenHoor & Associates. “They really are taking off. If you were charting ACOs, there would be a steep growth curve over the last 18 months. People are saying, ‘yeah, these things can work and do work,’” he adds. “This is a global [health care market] trend” (see box, p. 9).

Blue Shield of California, one of the more active players among Blues plans in the ACO space, is offering details of its eighth ACO, a three-year initiative with Dominican Hospital and Physicians Medical Group of Santa Cruz County to serve 8,000 Blue Shield HMO members in Santa Cruz County. About 5,200 of these enrollees are members of the California Public Employees’ Retirement System (CalPERS). The groups will collaborate to share clinical and case management information and coordinate health care services. All told, Blue Shield’s ACO projects are delivering integrated care to 135,000 people in Sacramento, San Francisco, Walnut Creek, Santa Cruz, the Central Valley and Orange County.

Kristen Miranda, vice president for provider network management at Blue Shield of California, tells The AIS Report that it was spurred to form ACO partnerships in reaction to the current health care delivery system, which creates health plan, hospital and medical group silos that do not efficiently work together to control cost and offer optimal patient care.

“Consistent with our not-for-profit mission to provide access to high-quality health care at an affordable price, Blue Shield of California is collaborating with providers to launch ACOs, which work to optimize costs and quality by encouraging integrated care. The intent is to establish long-term collaborations to have a material, sustainable impact on health care costs for members and employers over time. For example, our ACO with Dignity Health and Hill Physicians Medical Group has delivered $37 million in savings over two years for CalPERS,” she says. The Blues plan intends to have 20 ACOs throughout California by 2015.

Blue Shield of California uses a three-way model where the health plan, medical group and hospital are all at financial risk for meeting quality and cost targets. “There is both upside and downside potential for all of us. This applies to services delivered in a hospital, at a doctor’s office, in a pharmacy, as well as services delivered by ancillary vendors,” Miranda says. “If the providers meet quality goals, we all win, not just the health plan. We structure our collaboration so that we are all incentivized to share clinical and case management information and coordinate comprehensive health care services to improve health care quality and patient service while reducing costs.”

Any cost savings will pivot on the amount and quality of data, she stresses. “We compile information to give us a comprehensive look at the medical costs for each population. This lets us identify cost drivers and develop interventions based on clinical best practices to address those costs. Ultimately, this will result in better care for chronically ill members and lower unnecessary costs,” Miranda explains.

ACO Activity Marks a Trend

The movement to form collaborative care is part of a sea change happening in the health care system, an expert says. “A lot of these [ACOs] are signals that health care delivery has to change and financing has to change to encourage that,” Stuart Guterman, vice president and executive director of The Commonwealth Fund’s Commission on a High Performance Health System, a health care policy think tank, tells The AIS Report. “[ACOs] offer providers and payers a way to share savings from doing things better.”

“They are attractive to payers and providers looking for ways to reduce costs — and no matter what happens in the election, there is a sense the health care system has to change, and people don’t want to be the last ones in or the ones left out,” Guterman adds.

He points to the work being done in Massachusetts as a prime example of how ACO principles are gaining currency. The Alternative Quality Contract (AQC) offered by Blue Cross Blue Shield of Massachusetts is proving successful in its first three years in controlling medical costs, and was the template for the state’s new cost-control law signed in July (The AIS Report 8/12, p. 1). “The AQC is similar to ACO concepts and targets spending rates with providers being rewarded for better quality,” Guterman says.

Wisconsin Blues Plan Offers New Product

Aurora Health Care, a not-for-profit provider in Wisconsin treating 1.2 million people per year, formed two ACOs with two different insurers in the last month. Both of the arrangements wrap insurance products around the ACO and target small- to mid-sized Wisconsin employers and self-insured organizations. On July 25, Aetna Inc. and Aurora said they were launching the Aurora Accountable Care Network, and on Aug. 15, WellPoint, Inc.’s Wisconsin Anthem Blues and Aurora said they would offer Blue Priority.

John Ulness, owner of Ulness Health Insurance and Wellness, is an insurance broker in the Wisconsin market who sees potential for the new Aurora-Anthem offering. “The Wisconsin individual, small and large-group health insurance marketplace is very dynamic with over 20 competing health insurance companies. The Anthem agreement to work closer with the Aurora Health Care system is a positive step to find better ways to control costs and deliver better value,” he tells The AIS Report.

The Aurora-Anthem ACO offers a specific price guarantee to each employer, with the potential for an average 10% reduction based on the employer’s past claims expenses, the companies said (see box, below).

“The 10% reduction in the past three-year growth rate is a starting point, but employers have seen the HMO model before and will want to see more,” Ulness says. As an example, he notes that employers are looking for greater information on cost and quality to help engage employees who have higher-deductible account-based plans make informed decisions.

“Employers want to know what insurers are doing to help employees and their families to improve health and lower cost,” Ulness adds. “Pulling providers into the risk arena is a big step to work together for better solutions.”

There are challenges, however, for the Aurora-Anthem partnership. One is how to effectively engage employees and dependents. “Greater results are possible by working in tandem with the employer and their benefit advisor in day-to-day communications, education, technology, benefit plan design and implementation. The one thing that Anthem and Aurora want to avoid is doing the same thing in a closer partnership and expecting different results. Employers want to see long-term health reform solutions that get at the root cause of higher costs,” Ulness says.

The best attribute of Anthem and Aurora’s collaboration is the commitment to the employer and plan members, he adds. “The 10% reduction in future growth rates is a positive number to build stronger relationships and strive for greater savings. Many employers in Wisconsin are moving to account-based plans along with robust wellness programs to engage employees in their health and health care. The marketplace is very active,” Ulness says.

“Everyone knows we need to change, and the more we learn about the Affordable Care Act, it appears that 2014 could produce a big surprise of even higher costs. That fear has many working to find better solutions,” he adds.

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

For more timely news and business strategies on accountable care organizations, check out the monthly newsletter ACO Business News at the AIS Marketplace.