Betting on Value-Based Care

Philip Betbeze, for HealthLeaders Media , October 30, 2012

Big bet No. 4: major investments

Banner Health in Phoenix fits the mold of a health system that has bought into the accountable care structure wholeheartedly, says executive vice president and chief medical officer John Hensing, MD. Again, a recurring theme is that sitting on the sidelines or "watchful waiting" is not a valid strategy.

Banner, one of the largest nonprofit hospitals in the country, with 23 hospitals in seven states, has been focusing on organizing its employed physician base—Banner Medical Group—but Hensing says that has mostly come on an ad hoc basis as physicians have expressed interest in being employed rather than independent. By far the biggest investment the system has made for its value-based care strategy has been in electronic medical record system and data warehousing capabilities.

"The medical group is an aligned group of clinicians that can focus on clinical excellence, but certainly the biggest test so far is the formation of the infrastructure and medical leadership that's required to form a delivery network that involves hospitals, the medical group, and independent physicians, so that we can participate in the marketplace of the accountable care model," he says.

As one of 32 Pioneer ACOs under CMS, Banner is seeking expertise in contracting, network development, and redesigning care delivery around the outpatient environment to avoid hospitalization and expensive medical interventions. In the payer space, it has joined a partnership with Aetna that should help achieve some of those metrics. Under the partnership, Aetna shares much of the population management and care gap identification, particularly in the ambulatory environment, to help Banner take on medical cost risk.

"That IT technology is quite new, and we call it the Aetna stack, and we're just beginning to understand those capabilities," Hensing says.

Though the Aetna partnership is important, Hensing is careful to say that Banner's is an open system, in that its strategic plan was never intended to be exclusive to one payer. Banner is managing Aetna's population in two ways, one with a narrow network product by which Banner is the predominant delivery system for all care, and also through a relationship that allows a so-called attributable model.

"With that one, we negotiated a reward and penalty for achieving certain targets of clinical performance," Hensing says.

Using that model as proof of concept, Banner has created a similar relationship with other major payers. Hensing says Banner recently successfully completed a similar narrow network product with Blue Cross Blue Shield of Arizona and recently completed discussions with Health Net for a narrow network product. With both, Banner will be using Aetna's infrastructure to apply to any population for which Banner has assumed risk.

"If our inpatient business remains the same, we'll continue to wring out cost, but that's not the big opportunity," Hensing says. "We're going to want to focus a lot of resources on managing people where they are and keep them out of trouble if possible. We've finally gotten into an arrangement whereby if we do a really good job, we'll have resources to do it better tomorrow based on how we're going to be paid for these services."

The big question facing Hensing and Banner is whether they can successfully retrain people to lead teams to help manage the most expensive members of the populations—those who consume "tremendous resources"—by 2014.

"We keep saying 2014, because 2015 is when we will really be assuming major risk," Hensing says. "So right now we're still quite early in a lot of our work. We don't have ambulatory protocols in place, we're not utilizing the full features of the Aetna stack, and we need to bring to maturation the leadership model in our own medical group."

Some pundits have suggested that hospitals should try to hire or contract all the medical underwriting and actuarial expertise they can to prevent such partnerships from becoming too one-sided, but Hensing scoffs.

"Having people who understand medical cost risk and clinicians experienced in medical management of defined populations is vastly more important than an actuary telling us how much risk we have."

But speaking of risk, Hensing also weighed in on the risk of so dramatically transforming reimbursement.

"The path we have been on is actually a low-risk path. Is there short-term financial risk if we stub our toe in risk assumption? Yes, there clearly is. But we view that as short-term only. With our ownership of a Medicare Advantage plan and a risk-assuming PHO [physician hospital organization], we've already got expertise that afforded us the confidence that even the short-term financial hits would not be deep and create harm to the organization. The worst thing, and the most high-risk, would be to continue by maintaining the status quo of nonpreparation for change."

Philip Betbeze is senior leadership editor with HealthLeaders Media.
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