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Model Suggests Power to Bend the Health Spending Curve

By John Reichard, CQ HealthBeat Editor

July 10, 2014 -- Efforts to "bend the curve" in national health spending are likely to be strengthened by the kind of results released by CareFirst's Blue Cross Blue Shield plan last week.

The insurer said its patient-centered medical home program was able to lower 2013 costs for nearly 1 million enrollees by $130 million below projections. Over its first three years—2011 through 2013—it was able to save $267 million below projections.

Insurers claiming that they are using the model to save money is nothing new, of course. In effect, it's part of the way they market their services these days. It's also important to ask how realistic their projections of expected spending on the enrollees actually were in order to assess the savings results.

But the results drew praise from a high powered panel of independent experts at a forum on Capitol Hill. And the insurer says it is contracting for three different independent evaluations of its results by the George Mason Center for Health Policy Research and Ethics headed by former Clinton administration official Len Nichols; a team of researchers from Harvard, MIT, and Brandeis; and Westat.

The model described by CareFirst CEO Chet Burrell included the kind of payment incentives needed to persuade primary care to exercise much more care in what services they prescribe and who performs them.

The results were presented amid continuing hope on the part of budget analysts that much flatter trends in health spending seen in the past few years are going to continue, in part because doctors are beginning to pay more attention to the costs of the care and insurers are starting to figure out how to get them to do it.

The CareFirst model involves creating small teams of primary care providers called "panels" who are assigned a group of enrollees. The teams are given an annual target for total spending on the health needs of all the patients, not just for primary care but for specialists.

If care for the groups costs less than the target, the doctors and nurse practitioners on the team get a bonus. The bonuses are sizeable. A primary care doctor may get $30,000 more per year from the insurer. CareFirst said that on average the teams—typically of about 10 primary care providers—get an almost 35 percentage point increase in the fees they are paid if they meet savings targets, combined with points assigned for the quality of treatment.

The providers pick their own panels, akin to school children deciding who they want on their team in a pickup baseball game. Patients are assigned to panels based on who the providers involved have treated in the past year.

The insurer makes it easy for providers to track all of the care expenditures for the patients involved during the year. They also prepare complete "care plans" for selected patients with costly chronic illnesses the better to manage their conditions and control their costs.

Patients are incentivized to follow the plan because CareFirst waives deductibles. Also, the patients are monitored to see if they are getting the tests and screenings they need, with nurses playing a critical role in the process.

More and more doctors are involved in creating teams and in changing who is on their teams depending on the results they are getting, Burrell said. The providers "choose each other," he said. "They look at each other's performance."

Burrell said that initially teams of doctors and nurse practitioners were formed by the insurer through what amounted to be a matchmaking service but now they are more actively involved in organizing themselves. "We now have hundreds of panel meetings."

How is the insurer able to pay the doctors so much more and still save money overall? Because primary care providers are the gateway to other types of care, notably specialists. They also decide where the care will be delivered. By making referrals to efficient specialists and cost-effective sites of treatment, they can cut down sharply on overall health care outlays Burrell said.

Panelists at the event, including Nichols, Michael Chernew, and Marci Nielsen of the Patient Centered Primary Care Collaborative appeared hopeful that the model will have a significant impact. In 2011, the panels collectively saved 1.5 percent compared to a projected rise in medical spending for the year of 7.5 percent. In 2012 the savings were 2.7 percent and in 2013, 3.2 percent. The projected increases for each of 2012 and 2013 were a percentage point or two lower than 7.5 percent figure used in 2011.

Whether the trends will hold up over time and whether the model can be effectively applied throughout the health system remains to be seen. Policy analysts still voice considerable skepticism about the medical home model. And one of the factors that will be key to whether it spreads further is whether public and private health care purchasers unite in insisting that providers follow it. But it appears to be a model the policy community is intent on pursuing.

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