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Hospitals, Blue Cross NC Share Risk with New Value-Based Contract

The Blue Premier value-based contract will require five health systems in North Carolina to share in cost savings and financial losses.

Value-based contract and shared risk

Source: Thinkstock

By Jacqueline LaPointe

- Five major health systems recently entered a value-based contract with Blue Cross and Blue Shield of North Carolina (Blue Cross NC) that will hold them financially accountable for total costs of care and overall quality performance.

Cone Health, Duke University Health System, UNC Health Care, Wake Forest Baptist Health, and WakeMed Health & Hospitals will join Blue Premier, Blue Cross NC’s new shared risk financial model.

“As a practicing physician, I have experienced first-hand the challenges plaguing our healthcare system,” Patrick Conway, MD Blue Cross NC President and CEO, stated in a press release. “Historically, our healthcare system pays for services that may or may not improve a patient’s health, and our customers simply cannot afford this approach.”

“Moving forward, insurers, doctors and hospitals must work together, and hold each other accountable for improving care and reducing costs. We applaud the leadership and commitment of these five leaders in healthcare to help transform healthcare delivery in North Carolina.”

Blue Premier aims to tie physician and hospital reimbursement to the value of services delivered. Therefore, total payments to the five health systems will be based on the organizations’ ability to control total cost of care and their overall quality performance, which will be measured by industry quality standards, Blue Cross NC stated.

READ MORE: Understanding the Value-Based Reimbursement Model Landscape

Under the value-based contract, the health systems will be able to share in cost savings if they meet quality goals to improve patient outcomes.

However, the contract also works the other way. In the event total costs exceed hospital and physician reimbursement, then the health systems will have to share in the financial losses.

“In the Blue Premier model, inefficiencies turn into an expense rather than revenue for a health system.,” the press release stated.

Blue Cross NC did not include how much the health systems could potentially have to repay if they do not lower total cost of care according to their benchmark.

But the health systems expect their value-based contracts with shared risk to move the needle on care quality and cost management.

READ MORE: Best Practices for Value-Based Purchasing Implementation

“Today we take another significant step forward in providing the highest-quality care to our patients and their loved ones through Blue Premier,” stated A. Eugene Washington, MD, President and CEO of Duke University Health System and Chancellor for Health Affairs. “And we are pleased to be partnering with other health leaders in North Carolina to achieve greater healthcare value, promote population health, and improve even more lives in the communities we serve.”

Kevin High, MD, President of Wake Forest Baptist Health, added, “We are working hard to bring the benefits of our learning health system to all North Carolinians. This partnership aligns the goals of patients, employers, the insurer (Blue Cross NC) and our health systems to provide real value – higher quality at lower cost while meeting and exceeding the expectations of our patients.”

The five health systems are going where many other providers are unwilling to venture.

Transitioning to value-based contracts with shared risk has been a challenge for most providers. In fact, a 2018 RAND Corporation and American Medical Association (AMA) study found physician practices are less willing to participate in contracts with downside financial risk compared to four years ago.

Hospitals, health systems, and other large provider organizations also tend to be risk-averse. For example, 71 percent of accountable care organizations (ACOs) in the Medicare Shared Savings Program (MSSP) said in a 2018 survey that they would rather terminate their contracts than share financial losses with CMS.

READ MORE: Exploring Two-Sided Financial Risk in Alternative Payment Models

But Blue Cross NC anticipates the value-based contract with shared risk to “help doctors more actively manage a patient’s health care conditions, leading to fewer hospital visits and better health overall,” the press release stated.

The agreement should also give providers more direct time with their patients and enable more frequent communication between the stakeholders, added Blue Cross NC.

The new value-based contracts are also part of Blue Cross NC’s commitment to have all customers under a Blue Premier value-based contract within five years. The payer announced that it expects 50 percent or more of all Blue Cross NC members to have a provider who is jointly responsible for the quality and total cost of their care by early 2020.

“As an organization strongly committed to the transformation of healthcare from volume to value since the inception of our physician-led ACO seven years ago, Cone Health is pleased to see a major payer organization like Blue Cross NC share in that commitment and move towards structures that incentivize and support the right care, at the right time, in the right place for those we are privileged to serve,” stated Terry Akin, CEO of Cone Health.

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