August 22, 2014
Article by David Glusman, Advisory Services Partner, "Co-Management: A Win-Win Model for Hospital and Physician Relationships," Featured in Philadelphia Business Journal
By David Glusman, Partner-in-Charge of the Philadelphia Office
A recent announcement by Independence Blue Cross (IBC) emphasizes the importance of hospitals and doctors continuing to develop win-win mechanisms for working together in response to payment reforms and quality initiatives that affect the future for both of them. In July IBC announced that its accountable care organization ("ACO") payment model has been accepted by more than 90% of the healthcare systems in the region. Under its program, IBC provides incentive payments if hospitals achieve cost reductions and quality improvements. An essential element of the program is that the hospitals are required to share incentive payments with physicians.
IBC's ability to achieve 90% participation signals an important transition away from fee-for-service payment mechanisms to payment arrangements that hold hospitals and doctors responsible for quality and costs. IBC's market share provides it with considerable leverage in the region and while the model may change and evolve, it is unlikely that the clock will be rolled back. The same holds true for physicians; the ACO incentive arrangement means their future revenue increases are tied to performance improvements.
Other health plans such as Aetna, Cigna, United Healthcare and Horizon Blue Cross have their own ACO programs emphasizing quality and cost control. Medicare is equally committed to moving away from fee-for-service with its own ACO program and with its bundled payment initiative.
The ACO model is linked to another reform tool promoted by most health plans, the patient centered medical home, PCMH. PCMH incentive arrangements reward primary physicians for reducing health plan expenditures for hospitalizations and specialist services. The expansion of ACOs and PCMHs provides the rationale for hospitals and doctors to work together. Under the ACO incentive arrangement, hospitals are placed in the leadership role for aligning with their physicians.