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Health reform forces providers, insurers to lay aside rivalries

October 2, 2010

The entire state of Indiana—not just Indianapolis and its four hospital systems—is fiercely competitive when it comes to delivering health care.

Case in point: Where else in the nation can one find a city the size of Bedford, population 13,500, that boasts two critical care hospitals? wondered Les Zwirn, executive director of Better Healthcare for Indiana, an Indianapolis-based not-for-profit.

“Indiana has six or eight two-hospital towns where they only need one,” he said. “You don’t need two hospitals in Lafayette, Bloomington or Kokomo.”

But in this new age of health care, ushered in by President Obama’s signing in March of a sweeping health care reform law, health care players are encouraged to remove the gloves if they want to reap the benefits of reform.

Repetitive services that critics say drive up the cost of care are frowned upon. What’s encouraged is cooperation among the major players, most notably among hospitals, doctors and insurers, enticed by numerous provisions and pots of money available to them if they indeed work together.

Paying hospitals and doctors as “accountable care organizations,” and unveiling bundled-payment initiatives in which expenses would be packaged by Medicare to encourage collaboration, as well as pay-for-performance programs, are big parts of the new health law aimed at improving care.

Time will tell whether the incentives are successful. Many don’t even take effect until 2014.

That’s two years after the Super Bowl will be held in Indianapolis. Yet, to Bryan Mills, CEO of Community Health Network, the three-year window they have to prepare for the changes may not be enough.

“Washington has given us a true sense of urgency,” he said. “If I have one concern, it’s, can we respond in the amount of time that we have?”

Hospital administrators argue they’ve been working together, without prodding from the new law, to reduce costs and improve the delivery of care by sharing patient information electronically through the Indiana Health Information Exchange.

Launched in 2004, the exchange is one of four operational exchanges in Indiana. It has a relationship with 62 hospitals and more than 14,000 physicians, some of which are in Illinois.

Ed Abel, a hospital accountant at Indianapolis-based Blue & Co., applauded the systems for sharing patient information. But he remains skeptical hospitals can improve upon past attempts to integrate.

“In terms of hospitals and physicians cooperating with each other, it’s at an all-time high,” he said. “As far as the individual systems and hospitals working with each other, I don’t know that it’s changed a lot in the recent past.”

Contentious, at times

The competitiveness of the four major hospital systems in Indianapolis—Clarian Health, Community Health Network, St. Vincent Health and St. Francis Hospital & Health Centers—peaked earlier in the decade when they collectively spent $215 million to build new heart hospitals.

Any rivalries among the hospitals have been overshadowed more recently by nasty fights with health insurers and physician groups.

Anthem Blue Cross and Blue Shield’s growing market dominance in Indiana is sparking a backlash from doctors.

American Health Network has been trying the past few years to get a law passed that would let its physicians cap the number of Anthem patients they see. The legislation it supports would ban so-called “open access” clauses Anthem includes in its contracts. These clauses forbid doctors from capping the number of Anthem-insured patients they see if they still are accepting new patients covered by other health insurers.

Not to be outdone, St. Francis spent months ensnarled in a bitter dispute over insurance-reimbursement costs with Anthem that ended in August 2009.

Four months later, St. Francis sued three physicians affiliated with OrthoIndy over the group’s new $20 million Indiana Orthopaedic Hospital, scheduled to open in Greenwood this year. The complaint alleged the new facility breached a partnership deal struck in 2001.

Local hospitals now, though, are scrambling to form their physicians and facilities into accountable care organizations, or ACOs, that can do business with employers and health insurers.

They believe the networks can help them negotiate new contracts with employers and private health insurers that reward hospitals for keeping patients healthy, guiding them through the confusing health care system and, thereby, reducing costs.

Another huge motivating factor is that, beginning January 2012, the ACOs also can do business with Medicare, the massive federal program for seniors, under the new health reform law.

ACOs must include primary care doctors and must serve at least 5,000 Medicare patients a year. Many believe such an organization and shared-saving contracts will become the most common way Medicare, the largest and most influential insurance program in the country, does business with hospitals and doctors. Shared-saving contracts are agreements in which Medicare will split the savings with doctors if ACOs can document both the quality of their care and the savings they produce.

Community Health probably is furthest down the path, with more than 1,000 doctors either working for or contractually committed to working with the network. Clarian Health is pursuing relationships with physicians, as well. Its Indiana Clinic is a joint venture with the Indiana University School of Medicine.

But Dan Evans, president and CEO of Clarian, warned that patients could interpret ACOs as limiting choice, a similar argument that dogged health maintenance organizations, he said.

“I don’t have an opinion on whether they’re wise or not,” Evans said. “In the meantime, we’re doing what everybody else is doing, preparing for it to be the law of the land.”

‘It can, and will, happen’

Other provisions in the new health reform law include bundled payment options, pay-for-performance models and chronic care management programs.

A Medicare pilot program that tests payment bundling beginning in 2013 calls for hospitals, physician practices, rehabilitation centers and nursing homes, among others, to collaborate with one another while caring for a patient.

A patient who breaks her hip, for instance, has it rebuilt and is admitted in a rehabilitation hospital before continuing her rehabilitation at home. Under the program, the litany of expenses would be bundled by Medicare to encourage collaboration and the best outcome, Evans said. Payments likely would be coordinated by the hospital.

Bundled payments also could be paid to groups of doctors for managing specific diseases like diabetes, and to primary care doctors for spending time on preventive care and coordination of care, also known as “medical home services.”

In addition, the health reform seeks to change the way health care is financed and delivered by moving away from the current volume-based system to one based on value and a pay-for-performance approach.

Insurers are supportive of the reform, said Dan Krajnovich, CEO of UnitedHealthcare in Indiana.

“We have a complex system today,” he said. “The bottom line is that we need to fundamentally solve some of the root issues of health care costs. How do we expand access and reduce cost? That’s a tremendous challenge.”

Meanwhile, Zwirn at Better Healthcare for Indiana argued that reform is vital to the nation’s well-being.

“We believe that it can happen, and it will happen,” he said. “Unless you slow medical spending, you’re not going to have a middle class.”•

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