A Novel Plan For Health Care: Cutting Costs, Not Raising Them

wow“A nonprofit health system in Salt Lake City, is trying something virtually unheard-of: promising to sharply cut costs rather than pass them on.”

By REED ABELSON

FEBRUARY 17, 2016

As employees know all too well, health insurance companies have one surefire way to lower costs: Ask their customers to pay more.

Intermountain Healthcare, a nonprofit health system in Salt Lake City, is trying something virtually unheard-of: promising to sharply cut costs rather than pass them on.

Its new health plan, SelectHealth Share, is guaranteeing to hold yearly rate increases to one-third to one-half less than what many employers across the country typically face.

To help keep the rate increases roughly in line with a rise in consumer prices, Intermountain, which operates 22 hospitals and employs 1,400 doctors, says it will produce savings of $2 billion over the next five years.

Health systems and insurers are closely watching Intermountain’s rollout. It has established itself as a leading health system by tracking and analyzing costs and the quality of patient care, allowing it to improve treatments and reduce unnecessary expenses.

Intermountain’s plan is “the first innovative thing we’ve seen in a long time,” said Dave Jackson, managing partner for FirstWest Benefit Solutions in Orem, Utah. “Share has got everybody at the table — everybody’s got accountability and got things to do.”

Intermountain has already saved money by renegotiating the cost of surgical staplers, pitting a cheaper manufacturer against another and saving $235,000 a year. It saved $639,000 a year by ensuring that heart attack patients get into the catheterization lab within 90 minutes of emergency room contact, thereby helping patients recover faster.

Some systems might be more likely to reduce services or shrink their money-losing operations if they tried to guarantee a long-term lock on price increas

Patricia R. Richards, the chief executive of Intermountain’s insurance unit, SelectHealth, said its new effort was not a marketing gimmick. “We’re fundamentally changing everything, she said.”

CAYCE CLIFFORD FOR THE NEW YORK TIMES

But a few are heading in a similar direction to Intermountain’s, experimenting with ways that avoid the traditional piecemeal approach of fee-for-service care. The idea of locking in rate increases — Intermountain’s Share program sets the increase at approximately 4 percent — is particularly attractive to employers because coverage then becomes a predictable expense.

Patricia R. Richards, the chief executive of Intermountain’s insurance unit, SelectHealth, said its new effort was not a marketing gimmick. “This is not a repackaging of the same old stuff,” she said. “We’re fundamentally changing everything.”

While there is a lot of experimentation taking place in the health care industry, including the creation of so-called accountable care organizations that try to make health systems more responsible for the long-term care of patients, much of it is at the very early stages, said Brian J. Marcotte, the chief executive of the National Business Group on Health, which represents large employers. “You almost have to look at them like start-ups,” he said.

And there are financial risks. Intermountain, for example, could incur significant losses if it wound up having to spend a lot on caring for patients, which is why few, if any, systems — or insurers — make similar guarantees.

CAYCE CLIFFORD FOR THE NEW YORK TIMES

And while Intermountain is known for its high-quality care, other systems that might try to mimic this approach might be tempted to skimp on services to make sure they do not lose money, said Suzanne Delbanco, the executive director of the Catalyst for Payment Reform, which represents purchasers of health care like employers. The challenge is “how to balance rate guarantees with quality,” she said.

Some of Intermountain’s goals to improve care and save money are elusive and tough to evaluate so soon, because the new plan has enrolled only 11,000 people so far this year.

Like other systems looking for savings, Intermountain is concentrating on its most costly patients, most of whom have complicated chronic conditions like diabetes that also might be accompanied by depression or other problems.

But tackling such issues can be slow or even grudging. A two-year-old clinic created to deal with these sick patients was expected to manage about 1,000 patients, but so far only about 140 are enrolled, many of whom need a daily check-in. Patients are also staying longer — while the ultimate goal is to send someone back to a primary care doctor once stable. Only 19 patients to date have graduated from the clinic and can now see a regular doctor.

In caring for patients, doctors must take painstakingly small steps, said Dr. Timothy A. Johnson, a senior administrative medical director at the clinic. Someone whose diabetes is dangerously out of control may be more engaged by another condition, and doctors must adjust “even if it’s the diabetes that is scary at the time,” he said.

While it says the clinic appears promising, Intermountain says it will not have information it can share publicly until this summer. One patient was going to the emergency room nearly every other day because of anxiety, for example, and is now going only half as often because the patient calls the clinic instead.

In 2016, the system expects to achieve savings approximately equal to 8 percent of its volume, or about $500 million. It decided it would not keep the savings or wrangle with outside insurers about who gets to pocket the money.

“What we’ve decided to do is to give it back to the community in terms of lower rates,” said Dr. Brent James, the executive director for Intermountain’s Institute for Health Care Delivery Research.

But what distinguishes Intermountain is that it has agreed to care for about a third of its patients for a fixed amount, meaning that it is already at financial risk if its health care costs rise too much because it did not do enough to keep people healthy or because its treatments were too expensive.

Other systems lose money if they find ways to provide less care, and any savings typically flow to outside insurers. “Your ethics align with financial incentives,” Dr. James said.

While offering a guarantee remains a tall order for Intermountain, it is among the minority of systems ready to do so. Intermountain is “probably in a better position to take on risk and have the systems and capability to manage care,” said Mr. Marcotte of the National Business Group on Health.

Only a few other systems are taking similar steps. In Albany, CDPHP, a nonprofit insurer, has been offering employers a plan that caps any rate increases at under 10 percent in the first and third years. Some companies are experiencing much lower rate increases.

Many systems will experiment with becoming more financially responsible for the care they deliver by offering their own Medicare Advantage plans, said Paul Keckley, the managing director in the Navigant Center for Healthcare Research and Policy Analysis.

But Intermountain also says its success is dependent on the efforts of everyone involved. Doctors who are not affiliated with Intermountain who care for patients under the plan must agree to changes like using an electronic medical record and sharing information about their outcomes.

Employers must agree to offer coverage that their workers can afford by paying for at least 70 percent of average premiums and funding a savings account with a sizable contribution. Businesses must also choose SelectHealth as their sole insurance company within the area.

The longer-term contract enables hospitals and doctors to take care of patients without worrying about whether they will switch if their health plan changes or skip a needed doctor’s visit because of a high deductible. Otherwise, said Paul Ginsburg, a health economist at the University of Southern California, “it makes it very difficult to engage enrollees early enough to detect their chronic diseases and manage them,” he said.

Under the Intermountain plan, employees also are required to take more responsibility. They have to agree to participate in programs like a health risk assessment or have a health screening like a cholesterol check or colonoscopy if they are over 50. They may have to employ a digital health coach who might send them an email urging them to walk more, or they may use an online tool to help decide if they need surgery for their back pain.

“We have not seen anything similar from other providers,” said Lana F. Jensen, an official with the Utah County government, which provides coverage for 700 employees. “This is worth a try. We’ll take a leap of faith.”

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FROM PATIENT ADVOCACY FIRM

Yeah, they have been talking about this fairly publicly for 18 months or so, but this is the first national press I have seen on this.

I read this with more than a little cynicism.

Select Health’s CEO says : its new effort was not a marketing gimmick. “This is not a repackaging of the same old stuff,” she said. “We’re fundamentally changing everything.”

OK – they are still targeting CPI + 1%. In other words growth higher than inflation.  Their wholly owned, not-for-profit (ha, ha) provider unit had a $2B surplus last year.

It is easy to cap prices when you are already charging way too much and making a killing.

These folks could reduce premiums by 15% to 20% if they needed to. In my opinion, this really is just a marketing gimmick.