ACO Update: Issue #3
March 6, 2011
Posted by chcablogadmin in : Financial Viability, Healthcare Reform
If you’ve see one approach to accountable care, you’ve seen one approach to accountable care. The third issue of our ACO Update provides you detail on initiatives to bring the right people to the table for post reform discussion. We also profile Driscoll Children’s Health Plan (DCHP) in Corpus Christi, TX. CEO Mary Dale Peterson, M.D., shared 10 years of experience managing cost and quality outcomes for now 60,000 members in 14 counties. The bottom line is the experience has been both challenging and rewarding. For DCHP, the HMO experience had led to better understanding of accountable care.
Jacqueline Kueser, Vice President, CHCA
Jacqueline.kueser@chca.com
- Lessons from 10 years–Driscoll Children’s HMO
- Children’s Hospital Leaders Discuss ACOs and No Regret Strategies
You may also access the newsletter (ACO Update_3-06-11) as a document to print and share within your hospital.
add a commentHow Do Children’s Hospitals Operate in an ACO Environment?
March 6, 2011
Posted by chcablogadmin in : ACO Update
Seven children’s hospitals’ strategic planning and finance executives met for a day in January to address the following questions: How do children’s hospitals operate in an ACO environment? What are the no regret strategies for an enhanced delivery system and community care?
The group indentified four no regret strategies for operating in an ACO environment including cost reduction, changing the model/delivery of care, developing a primary care strategy, and understanding the centrality of IT/data. They also identified drivers for understanding the post reform environment and identified required competencies based on the CHCA 2010 R&D project “Systems of Care” Strategies.
Read an overview of the group’s collective thoughts and strategies. Feel free to use this information with your strategic leadership teams.
add a commentLessons from 10 Years of Operating a Child-Focused HMO
March 6, 2011
Posted by chcablogadmin in : ACO Update
Driscoll Children’s Health Plan (DCHP) CEO, Mary Dale Peterson, M.D., was kind enough to speak with CHCA’s ACO Update about the hospital system’s 10 years of experience managing cost and quality outcomes for what has grown to 60,000 members in 14 counties. The bottom line is the experience has been both challenging and rewarding.
And it seems fair to say that planning; implementing necessary cultural change associated with development and successful operation of such a plan; a focus on improving the community’s health; patience, and diligence are key ingredients for success.
A wholly-owned subsidiary of hospital system based in Corpus Christi, TX, the health plan was started about 10 years ago in response to the state’s somewhat late participation in the federal Children’s Health Insurance Program (CHIP). The state sought bids and the DCHP was initially the only bidder and provider under the new program. It is a full-risk plan.
Initially, the state had only CHIP beneficiaries under managed care but in 2006, it broadened the program to include other Medicaid categories of beneficiaries which also led to commercial competition (Amerigroup and Superior are now competing plans). Included among DCHP’s members are three thousand pregnant women accounting for about three hundred deliveries a month (performed at adult hospitals under contract with the Plan). Obstetrical and neonate care consume about 40 percent of the DCHP’s overall health care costs. Driscoll Children’s Hospital accounts for about 30 percent of the DCHP’s health care costs.
The driver for starting the program was to support the hospital’s mission of seeing that children have high quality health care readily available to them. The hospital also recognized that, with over seventy percent of its budget coming from Medicaid, it needed to stay in as much control of its destiny as possible, recognized that reducing high cost baby care required addressing issues during pregnancy and effective coordination of care following complicated or less than optimum deliveries. It also recognized that Medicaid rates would be (and are continuing to be) cut and that fiscal health was tied to removing unneeded care expense. As part of the DCHP’s efforts to reach out to providers involved in prenatal care and deliveries (i.e., non-Driscoll Children’s Hospital physicians and adult hospitals), it would be necessary to pay appropriately and promptly and be fair and very judicious about issuing payment denials.
The state’s program, now called the Star Program, is expanding yet again to 10 more counties. The state has issued an RFP for the expanded program, and DCHP is a bidder and is having to re-bid on current business. It will cover mostly children, pregnant women and “ultra indigent” adults.
DCHP currently contracts with 15 hospitals and an overall panel of 1,500 contracted providers. The number of hospital contractors is expected to double, and the physician contractor complement will increase as well. The Plan administers several payment arrangements – it pays rural hospitals based on TEFRA Medicaid rates, pays some providers (mostly hospitals) based on DRGs, with most specialists paid “enhanced fee-for-service.” Over half of primary care physicians are paid on a “cap-lite plus” basis with carve out and special payments for actions DCHP wants to incentivize. The state requires extensive reporting. DCHP also invested in technology including creating a physician web-based portal as well as implementation of electronic medical records and is working on creation of a Health Information Exchange (HIE).
It took a full two to three years to start seeing the fruits of the plan’s efforts with losses occurring before the wellness, prevention and improved patient management steps took hold. When the program was limited to CHIP, the plan was essentially a break-even proposition. When it entered into the Star program, the state anticipated an immediate savings due to the transition to Medicaid managed care of 17 percent. As the state reduced DCHP premiums by 17 percent, the plan lost $17 million in 15 months, and the hospital was its financial safety net. The plan made it up in the second year of participation in the Star Program as the state reset the premiums and rates. DCHP is currently profitable. The plan and hospital benefit from the steady (per member per month) revenue and its profitability contributes to the hospital’s benefit as well
Editor’s Note: Keep in mind that with only 30 percent of its payouts for care going to Driscoll Children’s Hospital, the plan is managing a much larger share of the financial pot than would be the case if the hospital still contracted with the state as a regular Medicaid provider. Also, DCHP improves the efficiency of care and reduces unneeded health care expenses which financially benefit both the plan and the hospital.
DCHP instituted major initiatives to reduce OB delivery care costs, improve outcomes and reduce NICU days:
- Received a Title 5 grant to host educational baby showers at WIC offices, housing projects, high schools, etc.;
- Initiated home visits and involved registered dieticians and lactation consultants and added maternal fetal medicine specialists;
- Engaged OB leaders to work on lowering low birth weight deliveries over a three-year period;
- Focused on the fact that one-third of babies in NICU were there for drug withdrawal;
- Developed an incentive contract to reduce inductions, and
- Established an outreach call center, a well-child registry and physician incentive programs.
These steps saved the state about $10 million. Additionally, these efforts led to a 12 percent reduction in premature births, a decrease in the traumatic birth rate by 75 percent, decrease in the number of newborns requiring stays in the NICU by 17 percent and reduced NICU days at Driscoll Children’s by one-third (4,000 patient-days) alone. DCHP produced a 15percent reduction in preterm elective inductions and a 22 percent reduction in the percentage of elective inductions associated with preterm deliveries. Efforts are currently underway to regionalize very premature births at Driscoll. Another focus is the role drug abuse and mental illness plays in impacting the cost of care.
Other accomplishments include:
- About a one-third reduction in NICU average daily census;
- Approximately $10 million dollar per year reduction in NICU expense for this population;
- An 18 percent reduction in dental OR cases through efforts focused on dental caries reduction;
- Improvements rates of 22-25 percent in the well child program;
- The lowest short-term diabetes admission rate among the competing plans and for the Star Program in the state, and
- Significantly lower administrative costs and medical expenses per member than for DCHP’s two main competitors.
Beside the trials associated with improving, coordinating and managing care across a broad range of service providers, there have been natural challenges in dealing with DCHP’s parent. While hospital-associated physicians generally support efforts to deliver the right care at the right time and place, the new approach to care as part of the plan’s mission has required some work. There are natural tensions that require close relationships between the hospital and health plan. As a result, DCHP leadership interacts more regularly with the hospital system’s CFO and CEO. DCHP is also considering providing more aligned incentives for pediatric specialists.
It is believed DCHP will be instrumental in helping the hospital system deal with additional cuts in Medicaid payments. The legislature and the Health and Human Services Commission have taken notice of the increases in quality and cost savings the Driscoll system has been able to accomplish. This will give Driscoll some credibility with future expansions of managed Medicaid and hopefully avoid some of the proposed draconian cuts in Medicaid. The state’s legislature studied eliminating Medicaid—a study that revealed even to ultra-conservatives that doing so would be devastating. But the state is facing a budget shortfall of $27 billion while the number of beneficiaries continues to significantly rise. Medicaid benefits are rather rich as well. The state also accounts for only seven percent of federal Medicaid spending but has 12 percent of the nation’s Medicaid population. The undocumented issue continues to grow and there is belief that the federal government needs to pay 100 percent of ER costs for patient care for undocumented individuals versus the current 60 percent. The state is looking at upper limit payments (a potential cut of $9 million dollars per year for the hospital system) and a provider payment cut that would cost the hospital system about $10 million per year.
Although the work and assumption of risk in developing the health plan were great, there have been wonderful accomplishments for which DCHP can be proud—preventing illness, mitigating the severity of illness, reducing costs and improving outcomes.
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