At the intersection of health, health care, and policy.At the intersection of health, health care, and policy.

Four Years Into A Commercial ACO For CalPERS: Substantial Savings And Lessons Learned

April 17th, 2014

by Glenn Melnick

and

Lois Green

Background: In a very short period of time, Accountable Care Organizations (ACOs) have become an important and widespread part of the US health care landscape. A recent Health Affairs Blog postestimates the total number of public (Medicare) and private ACOs at more than 600 nationally, covering more than 18 million insured population. Despite their rapid and widespread adoption, relatively little is known about how ACOs actually work and how successful they have been. This is due in part to their relative “newness,” as many reported ACOs are just getting up and running. Others have been operational for short periods of time and have yet to produce meaningful or long-term sustainable results.

This Health Affairs Blog post helps fill some of this void by reporting on the operational experiences of one of the oldest (4+ years) and largest commercial ACOs in the nation. A previous Health Affairs Blog post reported on its initial planning and start-up phase, and a subsequent Health Affairs article reported on its early financial results.

In 2007, Blue Shield of California, along with provider and employer partner organizations, began exploring development of one of the first ACO-like programs in the country to serve Commercial patients. It launched in 2010 and, as reported below, has been generating savings to consumers throughout the period. Located in the competitive Sacramento market of northern California, the =ACO is an example of an innovative shared savings model involving a large insurer—Blue Shield of California; a purchaser—the California Public Employees Retirement System (CalPERS); a physician group—Hill Physicians Medical Group (HPMG); and a hospital system—Dignity Health. The population served approximately 42,000 CalPERS employees and their families covered by Blue Shield.

In this Health Affairs Blog interview, senior executives from each of the partnership organizations, all of whom have operational responsibilities and oversight of this ground-breaking Commercial ACO, discuss key operational aspects of the ACO and its implementation. They discuss evolution of the culture, governance and essential “partnership” relationships an ACO requires to survive and thrive. In addition, they detail specific operational initiatives designed to coordinate and manage care, and report on how these initiatives have fared over the four-year period since the ACO’s launch. Empirical results show success in many areas, with challenges in some others. Of particular note has been overall cost of health care (COHC) savings reported at gross savings of more than $105 million, with net savings of $95 million to CalPERS members, since 2010. Finally, the partners illuminate the ACO’s future directions and offer lessons for other organizations considering development of an ACO delivery system for the Commercial market.

The interview was supported by funding from the California HealthCare Foundation.

Glenn Melnick: With four years of experience and more than 40,000 primarily Commercial enrollees, the CalPERS ACO is one of the oldest and largest in the country. The level of effort has been substantial. At this point, have you found a need to tweak the risk model that Blue Shield President/COO Paul Markovich discussed in his 2012 Health Affairs article?

Kristen Miranda, Vice President for Strategic Partnerships and Innovation, Blue Shield of California: I’m pleased to say that, heading into year five, the basic financial model hasn’t changed. It’s quite a complicated mouse trap and we worked hard to do it right at the start in order for the model to be long-term sustainable. As you know, there are three parties: Blue Shield of California, Dignity Health and Hill Physicians Medical Group. All three share risk for all services, but we also tried to calibrate the risk somewhat to reflect each organization’s ability to impact a given line item. HPMG, for example, has more risk for pharmacy because the physicians have stronger control levers, but Dignity Health has a piece of it too. We all do. In year two, we did tweak the model a bit to further adjust risk given the control each party had but, overall, the initial financial model has given us a really solid foundation.

Lois Green: How, if at all, has the governance and organizational structure of the ACO evolved over time?

Stephen Foerster, Vice President of Managed Care, Dignity Health: In terms of the overall structure, one of the key design elements of our ACO is that we chose to create a virtual integration model at the start. If we had set it up as a joint venture with classic shared ownership and control, start-up costs would have been substantial. We didn’t believe we needed another organizational overlay; it iseach organization taking accountability for its behavior. Each organization dedicated existing resources including clinical, administrative and informatics resources. Periodically, we collectively and individually assess how much of our existing resources are dedicated to the ACO.

Rosaleen Derington, Chief Medical Services Officer, Hill Physicians Medical Group: We continue to have a team structure, with executives from the three partner organizations serving on the ACO Board Committee. The ACO Core Team also continues, with one change among the three executives who have high-level accountability. It’s important to note that there is no one leader in the Core Team—we’re all accountable. (See Exhibit 1: CalPERS ACO Governance Structure — click to enlarge.)

Foerster: When we first came together as large group of individuals to talk about how to organize, we had a good work group structure organized around our initiatives, but we spent a lot of time that could perhaps be avoided by others in the future. In some cases we streamlined and focused and rolled out sub-groups; for example, we identified a Dignity Health physician champion for our hip/knee surgical initiative because control lies there. Other times, Hill physicians led because they had more levers to work within the group. In the beginning, pharmacy and medications was a broad focus. Over time, the group recommended zeroing in on the inpatient side. It was a fair assumption to focus on cost drivers from the facility side, with pharmacy about 15 percent of our total cost. More recently, due to the ACO’s relative success in managing the facility cost of health care, we’re once again focusing as a partnership on retail pharmacy and ancillary service costs. So we’ve adjusted and learned as we have gone along.

Derington: For the Core Team and others, I have to stress that this was only part of our work. We all kept our “day jobs” in our respective organizations. As we got underway, some people had a difficult time moving out of their traditional silo roles and working in a collaborative fashion. At some point, teams were told they needed to find ways to work together in order to deliver the best care members/patients. Anything less than total collaboration was not acceptable. Yes, some people who didn’t have the personality or mindset left. But now, five years into the project, we are at our best ever.

Bringing three organizations with different cultures together for a portion of their business has not been easy. While we were very focused on breaking down organizational barriers for the ACO population, for the rest of our members and patients, it was business as usual. Staff turnover in all three organizations in the early years was an issue. We had not yet institutionalized processes and procedures, so there was no organizational depth. Five years later, that is as big an issue, although we have some very key personnel at the leadership levels that are driving innovation, trust and commitment. One positive of the disruptive change in personnel was new Clinical/Program Leadership. Dr. Terry Hill (HPMG) and Terri Scott (Dignity Health) both have the clinical leadership and cultural fit to spearhead our clinical initiatives. Early on we spent time managing relationships, but clinical leadership set the tone of transparency and commitment—established the culture. Now it’s part of who we are. One must have a collaborative bent and work together to support one another—you must see the big picture.

Melnick: You mentioned that the virtual model saved start-up costs. What major start-up costs were there? Many of the emerging ACOs are smaller, maybe just 5 to 8 thousand members. Is it worth the cost and effort for such small populations?

Miranda: The ACO was equally funded by the parties. Up front, they agreed on incremental resources that were a small line item in the cost of health care (COHC) budget. For HPMG and Dignity Health, these were mostly clinical and care management. Blue Shield dedicated significant resources to project management, clinical support, and actuarial and medical informatics. All our organizations have spoken publicly about the approximate additional resource investment of $1 million per year, in addition to the significant ongoing staff time each organization has brought to the table. We found that project management (PM) is a critical skill to maintain the kind of rigor and dogged focus needed to keep this work on track. Initially, all the PM support was brought by Blue Shield, but over time both Hill and Dignity Health hired PMs of their own, which has really helped drive the work within each of our organizations.

Derington: To the question of size, it does help to have economies of scale. We have expanded our collaboration and use a lot of the same leadership to leverage existing knowledge and resources—that’s the unique advantage we have to build on scale. We are now also involved in smaller ACOs that are 5, 10, or 15 thousand members in size, so we have an array of ACOs, not just CalPERS.

Melnick: There has been some concern about whether ACO global cost of health care savings—which tend to come primarily from the inpatient side initially—are sustainable over the long term; that we pick the low-hanging fruit and it’s difficult to sustain. What has your experience been?

Miranda: There is no question that it gets harder over time, when you have to not only sustain the gains you’ve made, but keep raising the bar. Our early interventions definitely focused largely on inpatient interventions—although year one had some real success by focusing on key areas of physician practice variation around surgeries, as well—but we’re now looking more at patient centered medical home (PCMH) models, shared decision-making, pharmacy spend, much more focus on ambulatory care.

Still, the bottom line is hospitals have been the biggest piece of the health care dollar and are the biggest driver of cost, so it made sense to start there. Having an engaged hospital partner made all the difference. Our results had some ups and downs, to be sure, but we ultimately ended every year having exceeded our targets – all four years running!

From 2010 to 2013, this ACO generated over $105 million in gross savings—which is something I’m not sure any of us thought was possible when we started. The providers earned $10.36 million in incentive payments during this time, so net savings to CalPERS has been just shy of $95 million for the first four years. This translates into COHC of just under 3 percent for this population, as compared to a non-ACO annualized trend of 7.6 percent. Pretty remarkable.

Green: It’s been well documented that the pilot ACO targeted a series of initiatives ranging from information exchange to utilization management. In the final analysis, what had the greatest leverage in achieving those COHC savings?

Derington: In the first few years we tested a lot of initiatives and, realistically, we managed to gain a series of important first downs, but no touchdowns. Over time, however, I’d have to say that reduction in total inpatient days per 1000 driven by length of stay reduction and repatriation of patients into ACO-network hospitals have provided the most savings and touched members the most.

Green: You mentioned there have been “some ups and downs.” To what degree have you seen continued or cumulative impact?

Derington: This is a dynamic population. A small number of catastrophic cases or unusual months can skew overall utilization. If you look at the ACO’s key utilization indicators over time (12-month rolling average), you’ll see ups and downs, but an overall cumulative improvement in most of our key metrics. (See Exhibit 2 — click to enlarge.) Over the four years, we have been able to achieve and sustain reductions in LOS (-15.4% and -.6 days) and in total inpatient days (-16.2% and -38.6 days), even as the risk score of our inpatient population has increased (+13%). After adjusting for rising case mix, our total days per thousand have fallen quite substantially (-25%). We continue to work on the overall inpatient admission rate, which remains unchanged (-0.9% and -0.6 days per 1000) and ED visits per thousand, which increased by 17 percent (+22.7 visits per 1000) since the ACO started in 2010.

Exhibit 2: ACO Performance Metrics CY 2009 through October 2013

Green: Let’s look more closely at the initiatives that underlie how these results were achieved. Talk about the repatriation initiative. How did that work?

Foerster: Fundamentally we believe that the ACO provides better quality and lower cost of care. In addition, as facility utilization continues to decline on a risk-adjusted basis, the key to success for the hospitals is to provide all possible facility care within the ACO provider network.

Early in the pilot phase of the ACO, the partners agreed that a high level of collaboration was important so that hospitals had an upside. Blue Shield and HPMG really helped make that happen. Blue Shield provided real-time data on CalPERS patients in other, non-ACO hospitals. This enabled HPMG to determine whether those patients could be safely and appropriately transferred back into the ACO network. By focusing on this, we saw in-region but out-of-network CalPERS ACO patient claims decrease about 25 percent. This helped to offset the hospitals’ revenue loss from ACO cost reduction efforts that focused heavily on the hospital side of the equation, though we realize this isn’t a broad systemic reduction in health care costs. For that we looked at other initiatives. Repatriation — along with prepatriation, directing patients to ACO hospitals in the first place — continues to be a hallmark of success for the ACO and has been a critical focus over the last year. For example, we recently dedicated an RN to round on CalPERS members who are not in the ACO network, which has enabled better patient management and earlier repatriation when patients are stable.

Green: How about length of stay?

Derington: Reducing length of stay was a significant initial success and, as noted, we’ve sustained more than a 15 percent reduction. In the last couple of years, ACO partners have worked towards a team of case managers and hospitalists collaborating to manage CalPERS inpatients and also to reduce denials by enabling better patient communication.

Initially we focused on care coordination and nurse teach-back to reduce readmissions, getting patients primary care provider (PCP) appointments post-discharge, and Welcome Home calls to ease the transition from the hospital. In more recent years, we have brought in CalPERS-dedicated case managers and physician advisors who round with nurses five days a week. The case managers, hospitalists, HPMG medical directors, home health and SNF staff conduct interdisciplinary daily rounds at the two Dignity Hospitals where most CalPERS admissions and ED visits occur. And we have dedicated hospitalist teams for all Hill ACO patients there, as well.

We keep learning as we go. During the ACO pilot phase, we had case managers make post-discharge PCP appointments for patients, but the patient wasn’t actively engaged in scheduling. Not a surprise, only a third kept those appointments. After some false starts, we redesigned the process. Dignity Health staff make the PCP appointment with the patient’s involvement, and we typically try for 7 days, rather than 14 days, post-discharge. Coordinating scheduling is challenging when LOS is so short. We are trying to be more interactive with patients upfront. We also now have Hill pharmacists assist with medication reconciliation and management upon request of the Welcome Home nurses and HPMG PCPs.

Another ACO outgrowth is that HPMG brought concurrent review under care management in 2012. This is a little unusual, but it integrates control of continuity of care and improves communications. We fostered a culture change around care vs. denial. The ACO has helped give us greater insight into problems and opportunities to improve the care process. It has forced people out of their comfort zones and encouraged innovation.

Another example: HPMG heard we were hard to reach. The hospitals weren’t sure whom to call. We hired a clinical liaison in care management, a single point of contact for all clinical issues. One person very well trained can get things done and help alleviate the administrative burden. The ACO spurred interest in blurred lines of responsibility. Where are the disconnects—and how do reconnect them?

Miranda: Rosaleen is so right. We also had a huge focus on reducing readmits. HPMG and Dignity Health really bought in on a disciplined way to reduce waste, and we saw big improvements in that first year. The pilot stimulated a multi-entity readmission review process customized for CalPERS and Dignity Health rolled out a patient interview tool system-wide to understand drivers of readmission from the patient’s perspective.

Derington: The Readmission Root Causes Analysis led by the ACO’s Continuity of Care team showed us that among top reasons that patients ‘bounced back’ within 30 days of discharge was not recognizing other medical conditions; e.g. a surgeon might be unaware of a patient’s coagulation problem. We have worked with Dignity Health pre-surgery to make calls and identify pre-admission issues that could keep people in the hospital or increase the likelihood for readmission. And we have an internal medicine physician co-manage patients in for surgery. Medication reconciliation was another huge issue; for example, the patient stops filling or doesn’t fill a prescription due to a high co-pay, or has the same medication at home with a different name and is taking both. We saw major impact with patient education/teach-back about what to do when the patient gets home, how meds are reconciled, and how a patient can connect to their PCP if questions arise. One last thing: behavioral health co-morbidity is a huge underlying issue that we have been challenged to find and treat. Our Behavioral Health Coordination intervention work team is trying to tackle this.

Green: With the ED the proverbial “front door” to hospitals, what efforts did the ACO take to manage ED use and reduce unnecessary ED utilization? It looks to be an area of continued challenge. Any lessons or advice you can share?

Miranda: This has been an area of consistent focus and, as we’ve mentioned, unfortunately, not great success. We saw, in fact, a pretty significant increase in ED visits—nearly 23 visits per thousand–over the first four years of the collaboration.

Foerster: Reducing avoidable ED visits has been a challenging mountain to move. One factor is that the CalPERS ED co-pay is only $50, so there is little incentive for a member to avoid ED use. The CalPERS population is also geographically dispersed. A majority of members are in Sacramento County, but thousands live outside of the Sacramento-El Dorado and Placer counties service area in Yolo, Place and Butte Counties. It’s difficult to ask someone to drive to an HPMG urgent care center when they live 30 minutes from an ED with a $50 copay.

We do have eleven HPMG urgent care centers in the three-county area. Among other things, Blue Shield sent refrigerator magnets to promote urgent care and shared a monthly list of new or relocating members to outreach to. Where there were no urgent care centers, we sought to solidify the member-PCP relationship. We worked on member perception and physician messaging, such as advertising fast-track PCP appointment availability and providing physician coverage after normal office hours. For any CalPERS member who used the ED, Blue Shield fed us data so we could get a letter to the patient within a day, letting them know about options such as the Teledoc program Blue Shield started in 2012, or the 24/7 advice line. We presented ED use data to physicians for their CalPERS patients, but many didn’t have the information systems to be able to outreach directly. Oftentimes HPMG communicated on their behalf.

We also used predictive modeling to identify “frequent flier” patients and launched an initiative to facilitate transfer from the ED to more appropriate care—including a PCP home visit, intensive medical home management, home health care, and a skilled nursing facility. Within the four Dignity Health hospitals, we worked on a standard protocol for ED visits that would return a patient to his or her PCP for follow up care. We tracked post-discharge ED visits and placed hospitalists in the ED to avoid readmissions. There are also ED case managers 24 hours a day to try to connect people to services immediately and potentially avoid a hospitalization. After all of this, the ED visit rate per thousand is about where we started. So we are redoubling our efforts.

Green: What additional efforts are you implementing?

Derington: We have launched patient centered medical homes and neighborhoods. Starting in 2012 there were PCMH pilots in eight practices to enhance access to care. We supplemented the PCMH with the Virtual Care Team (VCT): virtual interdisciplinary teams with read/write access to practice EHRs so that Hill pharmacists can review the patient’s medication prior to his or her PCP visit and suggest possible generic substitutions or changes in the medication regimen. Medical social workers were added to Hill’s nurse case management teams. And we’ve sought to improve referral relationships through “neighborhood” development, including behavioral health providers. The PCMH is also about proactive population management by the PCP.

Green: Another initiative that seems to have contributed to reductions in inpatient admissions and LOS was the ACO’s emphasis on reducing surgical variation. How was this addressed?

Miranda: At the outset we looked at a Reden and Anders data set comparing HPMG to non-Hill CalPERS to identify where there were opportunities to improve. We looked at inpatient utilization patterns. We thought problems were going to be chronic disease, but were surprised that three big variances were knee replacement, hysterectomy, and bariatric surgery—all elective! Not chronic care! A focus on hip and knee procedures was valuable because it was the first initiative and broke the glass ceiling for sharing information between the hospitals and the medical group. It also helped identify information technology (IT) legal issues. We targeted hip, knee, bariatric, spine and hysterectomy surgeries armed with evidence-based practice research.

Derington: Early on, we found that some HPMG physicians were not doing hysterectomies using laparoscopy when appropriate. This resulted in an inpatient admission and unnecessary exposure to risk and extended recovery time. We shared the data and research among the GYN section. An intention to improve care and selective physician proctoring produced a significant decrease in inpatient hysterectomies. Of course, that was a revenue loss to the hospital, but we had to keep in mind our quality and COHC goals.

Foerster: There was lots of variation in knee replacement LOS, also — factors related to call coverage, how we were doing patient education, and so forth. We found one physician who used a different technique with dramatically lower LOS. Administration and the orthopedic surgeons came together around this and, over a period of 12-18 months, we saw a dramatic decrease in LOS for major joints that has continued. It took active engagement. The focus at select Dignity Health hospitals has reduced variability in joint replacement LOS, and more opportunity exists.

Miranda: There was considerable physician and facility variation when we started. We looked at the best LOS among physicians and the hospitals. The ACO set the standard. Subsequently Blue Cross designated Centers for Hips and Knees if they showed results better or equal to the ACO.

Derington: We also enhanced surgical prior authorization. Nurses validated whether patients had tried PT and failed. Surgery was seen as a last option, which curtailed a lot of procedures.

Foerster: In addition, HPMG authorizes both admissions and surgeries and made real efforts to keep those in network. For example, the partners have collaborated extensively to ensure that all surgeries appropriate for the outpatient setting are performed in the outpatient setting, regardless of the fact that the hospitals are capitated for outpatient surgery. We redirect about 500 procedures annually into the Mercy Hospital system that fall under the cap. Only about three percent of cases are not captured; for example, if we don’t have the capability at a particular hospital. This was a 180-degree turnaround for physicians who were accustomed to doing procedures in ambulatory surgical centers.

Melnick: With so many initiatives and activities, how are metrics tracked and progress monitored?

Miranda: Data, data, data! The ACO produces a monthly, high level dashboard of key financial and utilization metrics and other information needed to manage. It’s shared at all levels so everyone sees it and we can all use the same information as a tool.

Derington: Blue Shield tracks data, but they can have a lag, so HPMG tracks utilization data and watches authorization data to identify emerging trends. It truly is a team effort. We spent a lot of time in the early years refining the reporting together to ensure it was useful.

Melnick: It would seem that some key metrics, such as LOS, are particularly difficult to tie back to specific interventions or process changes. Have you been able to pinpoint cause-effect of the various interventions?

Miranda: We continue to struggle with how to attribute savings and outcomes to the interventions. Yes, we have pm/pm, utilization, and so forth — but how to really get at cause and effect, that’s far more difficult, because this work is complex and there are so many variables.

Melnick: What have you seen in terms of deployment of ACO-initiated processes to non-ACO patients? Has there been any impact you can point to?

Foerster: With hospitals there needs to be a single standard of care. For example, teach-back was done at all four hospitals for all patients—it’s the right thing to do. We have some anecdotes, but don’t have good data regarding spillover effects.

Derington: Most processes have permeated into physician practices overall—doing laparoscopic hysterectomies, for example. They started with the CalPERS ACO. Theoretically, lots of patients not in HPMG are benefiting. Within HPMG, processes for the Sacramento region members moved into other geographic areas, such as San Francisco and San Joaquin. They flow through to the rest of the organization, which makes it harder to assess impact.

Green: Launching the original pilot was quite visionary and gutsy. With four years down and into the fifth, from your perspective, what has the ACO meant?

Foerster: We started off calling the ACO a pilot for a number of reasons. Hospitals carry a lot of risk. We wanted to develop tools that would enable us to be effective in evolving reimbursement models. The pilot made us comfortable that we could be successful in an ACO. We learned that if we do the right things, small changes can have big impact. It let us see a way forward to successfully manage the cost of health care for our client, CalPERS. And it has given us the confidence that we can take an idea and make it successful. That was a big leap. It’s no longer a pilot; we’re in this.

Derington: We recognize that a medical group can’t be successful doing this on its own. HPMG needed both the hospitals and the health plan to make it work. The partnership was critical. The pilot enhanced collaboration and trust among us. We all got together on the same side of the table, aligned with the same vision and objectives. As providers, our relationship with health plan changed — it really turned around. I agree with Steve: we are truly in it together.

We’ve also been able to use what we learned as we have started ACOs with different partners. We are able to more rapidly determine what needs to be done. We know where to look for information; we have dashboards to draw from.

And we’ve learned that it takes time to set all the ducks in row and learn to play together. The real innovation takes place in the delivery system. We need to keep pushing down to the level where the care is delivered. Culture trumps strategy every time, so we continue to work on how to make systemic change. The pilot was a Petri dish. Now, for the ACO, persistence is key.

Miranda: Agree absolutely. Moving from pilot to a true ACO reminded us that it’s got to be about the long haul. There will be failures. This journey takes place over years. There has been so much waste, disorganization and redundancy in our health care system that early on we were able to achieve significant efficiencies by aligning incentives and getting our leadership teams in place. Over the past few years, we have seen an increased sense of shared purpose and trust that reaches deep into our organizations. The more obvious efficiencies are behind us now; progress in the next several years will require a more profound transformation. I see the need very clearly on the ambulatory care side. We will need to develop the skills and process to help physicians navigate the uncharted waters ahead.

Melnick: At the beginning, a major impetus for the ACO was to preserve and grow market share. Have you seen impact in that regard?

Miranda: Yes. The ACO has contributed to a more competitive premium point for Blue Shield relative to Kaiser in this market, which has helped us maintain our market share and even grow membership to some extent. The first year the ACO went live, we had a lower price point than Kaiser for the first time ever, and we picked up 2,000 new members. That’s big, transformational stuff!

Melnick: As we noted earlier, the ACO has achieved more than $105 million in COHC savings to date. What’s in store for the ACO in 2014 to sustain momentum?

Derington: We still have much to accomplish together. This year we are working to create a unique patient experience related to the ACO. We are focusing on creating the foundation for physicians to practice in new ways, pursuing a more team-based approach to care, moving more into telemedicine and the Virtual Care Teams and strengthening the physician neighborhoods. And we are working on greater electronic connectivity with all in the delivery system, including the patient.

Miranda: Our partnership in the CalPERS work is entering year five and has just expanded to include non-CalPERS Commercial members. Very soon, we’ll be going live with our first-ever Medicare Advantage ACO together. Blue Shield is getting ready to launch a product around these partnerships and also to implement the model in the PPO realm, so we clearly see this as not only sustainable, but as central to our strategic vision. At some point, we may optimize care delivery in a given ACO and run out of further opportunity, but I’d bet that day is not around the corner and it’s a problem, frankly, we’d love to have!

Melnick: Any last words of advice?

Foerster: It’s a worthwhile journey—there is so much to learn. Don’t wait to start. Move forward, even without the critical mass of membership, providers, and financial incentive alignment. We were opportunistic: What do we have, what simple tools can we develop? You can’t take years to plan a huge solution—invest a little, learn a lot.

Derington: Relationships are THE critical component. Pay attention to creating the right culture right from the start.

Miranda: Have a long-term mindset. This work takes significant commitment and resources – no organization should go into it thinking it’s about short-term, easy wins. But done right, the work is not just rewarding, it can be downright transformational.

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This entry was posted on Thursday, April 17th, 2014 at 1:35 pm and is filed under All Categories,Consumers, Employer-Sponsored Insurance, Health Care Costs, Health Reform, Hospitals,Innovation, Physicians, Policy, Quality, Spending, States. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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Four Years Into A Commercial ACO For CalPERS: Substantial Savings And Lessons Learned

April 17th, 2014

by Glenn Melnick

and

Lois Green

In 2007, Blue Shield of California, along with provider and employer partner organizations, began exploring development of one of the first ACO-like programs in the country to serve Commercial patients. It launched in 2010 and, as reported below, has been generating savings to consumers throughout the period. Located in the competitive Sacramento market of northern California, the ACO is an example of an innovative shared savings model involving a large insurer—Blue Shield of California; a purchaser—the California Public Employees Retirement System (CalPERS); a physician group—Hill Physicians Medical Group (HPMG); and a hospital system—Dignity Health. The population served approximately 42,000 CalPERS employees and their families covered by Blue Shield.

The interview was supported by funding from the California HealthCare Foundation.

Lois Green: How, if at all, has the governance and organizational structure of the ACO evolved over time?

Green: You mentioned there have been “some ups and downs.” To what degree have you seen continued or cumulative impact?

Exhibit 2: ACO Performance Metrics CY 2009 through October 2013

Green: Let’s look more closely at the initiatives that underlie how these results were achieved. Talk about the repatriation initiative. How did that work?

Green: How about length of stay?

Green: What additional efforts are you implementing?

Green: Another initiative that seems to have contributed to reductions in inpatient admissions and LOS was the ACO’s emphasis on reducing surgical variation. How was this addressed?

Derington: We also enhanced surgical prior authorization. Nurses validated whether patients had tried PT and failed. Surgery was seen as a last option, which curtailed a lot of procedures.

Melnick: With so many initiatives and activities, how are metrics tracked and progress monitored?

Melnick: What have you seen in terms of deployment of ACO-initiated processes to non-ACO patients? Has there been any impact you can point to?

Green: Launching the original pilot was quite visionary and gutsy. With four years down and into the fifth, from your perspective, what has the ACO meant?

Melnick: At the beginning, a major impetus for the ACO was to preserve and grow market share. Have you seen impact in that regard?

Melnick: As we noted earlier, the ACO has achieved more than $105 million in COHC savings to date. What’s in store for the ACO in 2014 to sustain momentum?

Melnick: Any last words of advice?

Derington: Relationships are THE critical component. Pay attention to creating the right culture right from the start.

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