Corporate Research Group’s Weblog

Six years before the federal government came out with its regulations for ACOs, Blue Cross Blue Shield of Michigan (Detroit) had already launched its own effort to promote coordinated care among physicians.

Since 2005, BCBS-MI has offered physicians financial incentives not only to meet quality and cost savings goals but to invest in the development of patient-centered medical homes and coordinated care capabilities.

In the 12 months ended July 1, 2011, for example, BCBS-MI paid out more than $75 million to 11,274 physicians as part of the company’s Value Partnership program. That figure is expected to rise to $110 million for the 12 month ending July 1, 2012. According to David Share, M.D., program vice president, half the payments will reward results and half will reward the development of coordinated care capabilities.

BCBS-MI announced earlier this year it is expanding the effort to reduce fragmentation in the healthcare system by rewarding physicians and other providers for better integrating care across the healthcare spectrum.  This Organized System of Care initiative has similar long-term goals to ACOs.  But Share argues there is an important difference. 

The government’s approach to ACOs, he argues, is top-down, i.e., follow these rules, makes investments, and if you save money you’ll get some rewards.  The problem is organizations don’t yet know what works and what doesn’t when integrating care as part of an ACO, he says.  “It doesn’t make sense to predetermine everything,” he says. “It’s stultifying.  It squelches creativity.  It’s stacked against organizations willing to take risks and try new things,” he adds.

Complete coverage appears in the September issue of ACO Market News.

Ten states have already enacted legislation to regulate or promote ACOs in 2011, with a wide variety of other bills pending, according to the American Academy of Family Physicians. All told, 27 states have 71 ACO bills pending or passed in 2011. Legislation varies and concerns things like establishing ACO demonstration projects, testing Medicaid ACOs, encouraging formation of private-sector ACOs, evaluating ACO payment structures, and incorporating ACOs into managed Medicaid programs.

David Share, M.D., vice president of Value Partnerships for Blue Cross Blue Shield of Michigan (Detroit), commenting on the federal government’s regulations concerning development of ACOs in a soon-to-be-publishing article in ACO Market News.

It doesn’t make sense to predetermine everything.  It’s stultifying.  It squelches creativity.  It’s stacked against organizations willing to take risks and try new things.

There are 16,865 physicians participating in medical homes, according to data from the Patient-Centered Primary Care Collaborative, up from about 10,000 physicians two years ago.  Still, the number represents less than 2% of total physicians in the U.S. and less than 5% of primary care physicians.  The Blue Cross Blue Shield of Michigan PCMH Program has the most participating physicians with more than 8000. No other PCMH initiative in the listing had more than 1000 participating physicians.

UnitedHealth Group (Minnetonka,MN) confirms that it has acquired the management assets of Monarch Healthcare (Irvine,CA), an independent practice association representing 2300 physicians.  The deal doesn’t include any of the actual physician practices affiliated with Monarch, but rather the IPA assets, which will become part of United’s Optum division.  Terms of the deal weren’t disclosed. 

A United spokesman had no comment on any “grand strategy” behind the deal, and Monarch didn’t return calls for comment.  The spokesman did say United has “a track record” for managing physician practices.  He points to United’s 2008 acquisition of staff-model HMO Sierra Health Services (Las Vegas), which owns the Southwest Medical Associates multi-specialty physician practice.  United also owns two other California IPAs: AppleCare Medical Group and Memorial HealthCare IPA.

So what’s in it for United?  That’s not exactly clear.  But consider that Optum offers a wide variety of products and services to physicians, including solutions for coding and billing, cost control, clinical quality, electronic data interchange, electronic health records, practice management, and financial management.

At the very least, United can use the Monarch acquisition to push these services down to IPA-affiliated physician practices.  It can also use Monarch as a test-bed and proving ground for Optum’s expertise.  It would be a similar approach to the one taken byAetna, which plans to use its acquisition of health information exchange technology vendor Medicity as a platform for pushing clinical decision-support applications to physician practices – a cornerstone of the company’s ACO strategy

In addition to targeting revenue streams beyond the core health insurance business, the strategy appears to be aimed at ensuring that insurers stay relevant as IPAs begin to take risk and perhaps even contract directly with employers.

But owning IPAs is likely to be a tricky proposition for a health plan and open to potential conflicts.  For example, WellPoint’s Anthem Blue Cross (Woodland Hills, CA) – a competitor to United – already has an ACO arrangement with Monarch.  A United spokesman says Monarch will continue to contract with all insurers.