Private Payers News

BCBS MI, Provider Orgs Sign Risk-Sharing, Value-Based Contracts

Blue Cross Blue Shield Michigan and seven major provider organizations have agreed to a five-year value-based contract including up and downside risk.

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Source: Blue Cross Blue Shield

By Kelsey Waddill

- Blue Cross Blue Shield Michigan (Blue Cross) is initiating value-based contracts with seven major Michigan healthcare providers under their alternative payment model called the “Blueprint for Affordability,” the payer announced.

"Blueprint for Affordability is a transformative shift in the way we approach the management of health care costs. This first wave of provider partners are true leaders in their industry – and courageous for stepping up and joining us in this bold new approach to promote quality and affordability," said Blue Cross president and chief executive officer Daniel Loepp. "Together with these health organizations, and others we hope will come aboard soon, Blue Cross seeks to permanently change the trajectory of health care costs in Michigan and make health care more affordable for people and employers."

Under the new model, the seven major healthcare providers, which represent 30 percent of Blue Cross’s commercial preferred provider organizations (PPOs) and Medicare Advantage (MA) market, have agreed to a more value-based reimbursement model.

The model increases providers’ risk-sharing by establishing an annual target for healthcare spending on Blue Cross members.

The providers have the incentive of upside risk. If the providers can keep costs below the healthcare spending target, they will receive a financial reward.

But the providers must also agree to take on downside risk. If their healthcare spending exceeds the agreed-upon limit, they must rebate Blue Cross for a fraction of the excess. This rebate will be used to keep costs stable for Blue Cross members, Blue Cross said.

The seven healthcare providers include Ascension Michigan, Henry Ford Health System which acquired its own Medicaid health plan this year, Michigan Medicine, and others.

"Health systems and physician organizations that sign risk-sharing contracts will be reimbursed according to how well they manage the health outcomes and total cost of care they provide to their patients, potentially impacting millions of Blue Cross members," Loepp said. "They will realize the financial rewards of success and assume some portion of the financial risk for cost overruns. I'm confident that each of the partner organizations standing with us today has the expertise, talent and dedication to be successful."

Blueprint for Affordability does not only create an upside-downside risk alternative payment model, but it also provides a channel through which to empower value-based care in the clinical setting.

Blue Cross expressed its hope that the new value-based contracting will encourage providers to deliver a higher quality of care, reduce avoidable tests and hospital admissions and readmissions, and increase care coordination.

"This robust, value-based payment strategy is the next step in our collective journey away from the traditional fee-for-service model, which has prioritized volume over value and driven up costs over decades," Loepp said. "It's a model that has been endorsed by the Centers for Medicare & Medicaid Services, and is working in other markets including Massachusetts and New Jersey."

The seven current value-based contracts will go into effect on January 1, 2020 and will be in effect until 2025.

The model is the latest of Blue Cross’s efforts to advance value-based care have saved $2.2 billion, by the payer’s estimation. The health plan boasts over 50 value-based care initiatives and partnerships such as its renowned Patient-Centered Medical Home program.

The payer has also seen success with its overall wellness initiatives among employer-sponsored health plans, utilizing virtual wellness to support whole health.