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Incentives, Coordination Key To HealthyBlue, Medical Homes


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The Mid-Atlantic’s dominant insurer is readying a new incentive-based coordinated care product and at the same time negotiating with health providers to create a network of patient-centered medical homes.

Together, the efforts by CareFirst BlueCross BlueShield lay the foundation for the kinds of patient-centered coordinated care and outcomes-based incentives envisioned by national health reform advocates, but largely unfamiliar to the healthcare industry of the Mid-Atlantic.

The product initiative, called HealthyBlue, is an HMO scheduled to launch in the third quarter of 2010, pending final regulatory approval. A companion program for medical homes, which is foundational to HealthyBlue, will launch Jan. 1, 2011.

Table 1-1: HealthyBlue Members Have Flexibility To:

  • Rely on the PCP’s referrals, incurring the least cost share.

  • Select their own network specialist without PCP referral and pay somewhat more out-of-pocket.

  • Select an out-of-network physician without PCP referral and pay the most out-of-pocket.

    Source: CareFirst BCBS

HealthyBlue combines incentive-based wellness and care coordination to achieve better health outcomes and cost effectiveness, according to Chet Burrell, CareFirst president and CEO. “It encourages paying attention to risk factors, staying well, and it rewards members for doing that. It encourages them to pick a primary-care physician, and to have their care coordinated if they are sick with a chronic disease, or multiple chronic diseases,” he said.

HealthyBlue will be offered to small and large groups across the CareFirst service area of Maryland, the District of Columbia, and northern Virginia, where the company has a total of 3.4 million members. According to company officials, HealthyBlue will fall at the low end of CareFirst’s product price range, but will be costlier than some of the company’s high-deductible offerings.


HealthyBlue rewards members for completing a health risk assessment, setting goals for reducing risk factors or improving health, and for meeting health goals. When certain levels are met, CareFirst deposits rewards into a health savings account or health debit card, up to $300 for an individual and $700 for a family.

David Kelly, executive vice president and senior consultant at Kelly & Associates Insurance Group in Maryland, lauded the concept. “It is a bold attempt by CareFirst to address individual awareness of risk factors. It encourages members to quit smoking, watch their weight, and take care of diabetes by rewarding them if they do,” said Kelly.

Deductibles vary from $900 to $1,200 to $1,500 under the three options, according to Burrell. “The idea is to give freedom of choice each and every time you seek service, to induce you—but not lock you in—to seeking care through a PCP,” he said.

Benefits will be value-based: the higher the value of a benefit, the more the coverage. For example, if a member needs a hip replacement, the PCP will work with colleagues to find the best surgeon by quality and cost effectiveness. If the patient takes the referral, her deductible will be waived in whole or in part. Designed to eliminate obstacles for preventive care and encourage the use of PCPs, HealthyBlue will require no copays or cost-sharing for PCP services.

The lack of PCP copays troubles Mel Stern, M.D., a primary-care physician for 30 years and a member of the legislative committee for MedChi, Maryland’s medical association. “When you remove all copays and cost-sharing, you double or triple visits to a PCP because people will then go to a doctor even if they don’t need to. With small to no copays, there is much less responsibility on patients and much more on the PCP.”

HealthyBlue’s value-based benefits will extend to prescription drug coverage. Certain maintenance drugs will be covered in full for chronically ill patients who follow a care plan set up by their PCP. “We know compliance with a prescription is typically low—only 30 to 50 percent. Essentially, we are telling patient Mary Smith: If we go to the trouble to set up a care plan, we want you to comply, and we will waive your deductible in whole or part to make that happen,” said Burrell.

How Does A Medical Home Program Fit Into HealthyBlue?

As HealthyBlue gets under way, CareFirst is recruiting physicians for its patient-centered medical home program, which offers three levels of additional reimbursement to providers who deliver results across their CareFirst population. First, they’ll have to convince skeptical providers.

“It’s hard to know if this will be a good thing until we actually know what the compensation is,” said Pam Kasemeyer, counsel to MedChi. “It’s all related to the question: Does the amount of compensation match with the required obligation for provided care?”

“The real issue for us is to increase reimbursement for primary-care doctors,” said MedChi Executive Director Gene Ransom. “CareFirst has the power to do this and end the problem right now. Creating a complex program that might or might not work in years is nibbling around the edges.”

Stern agreed and pointed out that the state has a shortage of primary-care physicians, and they may not be able to take on HealthyBlue’s extra work or extra patient visits even if they are paid fairly to do it.

He added that the model now calls for outcomes-based incentive payments to be made after several years of results document improved healthcare delivery and outcomes. “Providers have to wait one to three years to get substantial reimbursement. They can’t afford to do that.”

He said the medical home model puts PCPs on the hook to make referrals, much like an HMO. “We’ve had the process before, and people walked away from it. They don’t want to be restricted in who they seek care from, and primary doctors don’t want to get between the patient and the specialist they want to see. Yes, there are premium and cost-sharing differences, but we’ve seen that before, too.”

The Medical Home Project Will Recruit Physician Panels

CareFirst will recruit PCPs to join medical care panels, teams of no fewer than five and no more than 20 physicians, to constitute a medical home. These may be physicians in the same practice, groups held together as legal entities, or a group of solo practitioners that choose to work together.

“The point is they agree to use each other for backup and coverage, to be there for each other for a patient population,” said Burrell. “Becoming part of a medical care panel is the first step in the medical home process. It is the organizational building block, the bedrock, for the primary care medical home.”

CareFirst providers choose whether they want to participate, and select their fellow panelists. Solo practitioners can only be a part of the program if they form a virtual practice with other PCPs, and all agree to cooperate and provide back up. Panels that agree to become medical homes get a signing bonus—the first of three physician incentives aligned under HealthyBlue.

CareFirst’s database of claims will be used to attribute members to panels. If a member’s PCP is in a medical care panel, CareFirst will attribute that member to that PCP for purposes of the medical home. CareFirst estimates that a panel of 10 PCPs would typically have about 3,000 CareFirst patients.

CareFirst’s key expectation for medical home providers is to help those with high risk to reduce it, and coordinate care of people with chronic conditions. PCMHs will be asked to set up care plans for chronically ill members, whom CareFirst will help identify through its claims database. PCPs will be paid a $200 fee in addition to their office fee to develop the care plan and $100 later to follow up and modify the care plan.


Table 1-2: Physicians Gain Incentives In Three Ways Under HealthyBlue

  • Signing Incentive: Network providers agreeing to join as a CareFirst medical home earn fee increases of no less that 12 percent.

  • Care Plan Incentives: $200 per patient for creating a care plan and $100 per patient for follow-up care plan assessment

  • Outcome Incentives Reward Sustained Health Management: Year 2 reimbursements can be as much as 50 percent above Year 1; Year 3 can be up to 15 in addition. Medical homes with three consecutive years of outcomes improvement can earn additional fee increases.

Source: CareFirst BCBS


CareFirst will ask medical homes to intervene and educate members at high risk for a chronic disease, using care managers and others. “We want the doctors to bring them in and screen them and help them understand their risks,” he said.

Physicians are not required to set up electronic health records in order to participate in the medical homes, but practices will need a certain level of connectivity to CareFirst. Practices must choose among a number of approved vendors to facilitate the electronic data interchange for claims or other related transactions with CareFirst. Most practices of any size already have this type of connectivity, CareFirst officials said.

Like other medical home models, e-prescribing will be encouraged. Stern noted that these requirements may be a barrier for some smaller practices. “Many primary care practices do not have the capital to invest in IT or fund the necessary IT support personnel,” Stern said.

Basic Expectations Are To Help Chronic And High-Risk Members

The compensation model for medical homes starts with establishing a “global expected cost of care” for each patient and for all patients in total, based on claims history of patients blended into a performance year. For example, 3,000 members on average would be expected to have costs of $10 to $12 million a year and have about 60,000 service encounters among them, according to CareFirst.

The global care budget for the PCMHs—reflecting claims, illness burdens, costs in that geographic area and medical trends—would be $10 to $12 million. As care is rendered during a year, physicians, hospitals, labs and specialists all present fee-for-service claims to CareFirst and are paid in the normal way. The amounts are debited against the global budget.

While the physicians don’t bear any downside financial risk if actual costs are greater than the global expected cost of care, they do stand to garner shared-savings payments— in the form of substantially increased fee adjustments—if they manage to lower costs for the group as a whole. Success is also measured based on how a medical home performs among its peers.

Stern is concerned that the emphasis in the model appears to be on cost reduction rather than improved health outcomes leading to reduced cost. “The HMO model emphasized cost savings over healthy outcomes, which ultimately resulted in reduced services and not necessarily improved health. I am very concerned that this proposed model appears to be very heavily weighted toward cost savings rather than improved outcomes.”

Quality Measures Are Essential To New Model

CareFirst will also track multiple quality measures, including the degree of engagement between patient and PCP, accessability, appropriate utilization of health services—looking at such things as the use of the emergency room, hospital readmission—and HEDIS measures. The panel gets a quality score and is ranked against its peers.

“If a panel is above average in score and saved money, they are entitled to a fee reward for the subsequent year. If they saved, for example, 5 to 10 percent and scored above average in quality, the fee reward will be substantially higher, 40 to 50 percent higher, than what they would otherwise be paid,” said Burrell.

If a panel succeeds in this way for two consecutive years, this reward will increase by another 15 percent. If it succeeds for three consecutive years, the reward is increased 35 percent. The increases are paid in the form of a fee supplement, attached to the standard fee schedule for the next calendar year. “What we want to say to the PCPs now is: Do we have your attention?” said Burrell. “This is a very material reward, and it’s based on outcomes.”

HealthyBlue integrates many of the major concepts touted by health reformers: accountability for members and providers, performance measures and incentives, data-sharing and outcomes-based rewards. CareFirst is only now introducing the model to providers. At present, PCPs have plenty on their plate and will be tentative about any program that takes time and won’t show a financial payoff for several years.



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