- Blue Cross Blue Shield of Michigan and seven major health systems have entered into a new payment arrangement that financially rewards providers for hitting certain targets but also penalizes them for misses.
- The model will apply to roughly 30% of BCBS of Michigan's total commercial and Medicare Advantage market. The nonprofit insurer covers 4.7 million Michigan residents through various products.
- The new payment arrangements are set to begin Jan. 1 and last for five years. The health systems that have signed on include Ascension Michigan, Henry Ford Health System and Trinity Health.
The move is a step away from fee-for-service arrangements, which still cover most services despite the industry's push toward more holistic payment models. As the cost of healthcare continues to rise, providers and payers are looking for alternative models and better incentives that will ultimately curb the cost of care.
Instead of paying for volume, insurers are looking to reimburse providers for value. But uptake is still slow as an overwhelming number of providers are not taking on downside risk in alternative payment arrangements.
About 90% of value-oriented payment arrangements were built off fee-for-service infrastructure, meaning no downside risk was employed, according to a recent report from Catalyst for Payment Reform. "The results of these analyses are disappointing and a wake-up call that we are moving too slowly and essentially missing the mark," Robert Galvin, CEO of the firm Equity Healthcare and CPR board chairman, said in a statement.
In the new Michigan deal, providers will be expected to increase quality of care, avoid unnecessary tests, scans and emergency room visits, reduce complications and re-hospitalizations and improve coordinating patient care across all points of service.
The leaders of BCBS of Michigan said the new payment arrangement, dubbed Blueprint for Affordability, is just the first wave of new payments. "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," CEO Daniel Loepp said in a statement.
CMS has also been working to push the healthcare system toward more value-based arrangements through numerous initiatives, including Accountable Care Organizations.
CMS Administrator Seema Verma has said organizations need to take on more downside risk and sooner.
A final rule from last year, shortened the amount of time ACOs can enjoy only the upside risk, or bonuses for hitting targets, essentially pushing them to take on downside risk sooner. Verma said then the "results show that ACOs that take on greater levels of risk show better results for cost and quality over time."