New Marketplace

Engineering a Rapid Shift to Value-Based Payment in North Carolina: Goals and Challenges for a Commercial ACO Program

Article · January 23, 2019

In January 2019, five major health systems in North Carolina will begin their participation in a new accountable care organization (ACO) program with Blue Cross and Blue Shield of North Carolina (Blue Cross NC) that will hold them accountable for the total cost and quality of care of their respective patient populations. Simultaneously, we announced a new opportunity for independent primary care physicians in North Carolina.

By the end of this year, we plan to have the major health systems we work with aligned with two risk-based contracts. And within 5 years, we intend to have every single one of our roughly 4 million members attributed to a provider who is accountable for that member’s total cost and quality of care. We believe this to be the most rapid and comprehensive transition to value-based care achieved within a single large market in U.S. history.

The “Blue Premier” program represents a revolutionary shift from past risk-based models employed by Blue Cross NC. As part of a multiyear contract with Blue Cross NC, each system is slated to enter a two-sided risk arrangement that is backed by extremely modest unit price increases. We define extremely modest as up to 2% initially — based on the other negotiated variables that include the level of risk accepted — with a path to 0%. Health systems will be paid on quality-adjusted total cost of care savings generated for all members and, over time, all segments offered by Blue Cross NC, and any new revenue for the system will be based on their overall performance. Blue Cross NC insures the majority of people in the commercial market in North Carolina.

The other new program encourages independent practices to advance beyond our currently employed medical home approach into an ACO program with a multiyear glide path to two-sided risk. In recognition of the resources required to undertake this level of accountability for our members, we are partnering with a company, Aledade, to arm independent practices with valuable technology tools, analytic insights, and financial risk mitigation. Aledade works with independent practices, health centers, and clinics to build ACOs anchored in primary care and share in risk and reward under value-based contracts.

We believe that this combination of ACO program and enabling support will help independent practices thrive and extend the impact of value-based care to every corner of the state. We have a goal to have over 10% of our payments go toward primary care, which would be more advanced than all payers that we are aware of in the United States.

What Makes Blue Premier Unique?

The mechanics of Blue Premier are not categorically groundbreaking — we leaned heavily on our forebears from the Centers for Medicare and Medicaid (CMS) Next Generation ACO Model and the Blue Cross Blue Shield Massachusetts Alternative Quality Contract (AQC) — but there are several key components to ensure our Blue Cross NC version is innovative and optimized for the North Carolina market:

  • strong incentives and a total cost of care focus, including a transition to two-sided risk within the first 3 years of the contract;
  • sustainability through adding earned shared savings back into the subsequent year’s benchmark;
  • support of low-cost providers through regional trends and efficiency adjustments; and
  • an emphasis on quality and continuous improvement independent of cost savings by directly tying a portion of the total benchmark to clinical data exchange participation and increasingly challenging quality metrics.
Comparison of Certain Model Features in Blue Cross NC Blue Premier vs Next-Generation ACO Model vs BCBSMA Alternative Quality Contract

  Click To Enlarge.

In launching Blue Premier we confronted many challenges, both predicted and unforeseen. Furthermore, these issues were often divergent from those considered by CMS. Whereas CMS must create universally applicable ACO programs that are sufficiently attractive to generate applications and also agnostic to which specific providers engage in the program, the nature of contracts between Blue Cross NC and each system in our network requires individual contractual arrangements.

If one entity rejects our program, we cannot simply replace their numbers by going next door or across state lines for another willing health system or provider. These are our long-term partners, and their participation in this program is vital. There are also many more variables related to contracting in a commercial discussion, and the complexity is both liberating and complicating relative to the more modest repertoire of Medicare levers.

Standardized Customization

These multiple variables predictably lead to diverse preferences and priorities. Operationally, a single standard program would be most efficient. Realistically, large health systems are unlikely to share the same perspective in all respects. We struck a balance with a uniform superstructure of several unmoving pieces, then we identified specific elements that we could customize without undermining the integrity of the overall program.

Further, where we are initially focused on standardization, we genuinely offer to our partners that the best way to influence future iterations of Blue Premier is to join us at the outset. We know that there will be a lot of room for learning and refining over time, and we will do that together with those who are entering into risk with us.

Examples of Modifiable and Non-Modifiable Features of Blue Premier

  Click To Enlarge.

Aligning Incentives to End the Blame Game

There are mechanically easy ways to cut costs (e.g., reducing unit prices), but most are fraught with less-than-ideal consequences (e.g., increased volume of the highest-margin procedures). Health systems are led by individuals acting rationally in the interest of their own institutions. So long as the option of a fee-for-service unit price increase is available, a risk-based arrangement of comparable value will be unappealing. The fault is with the scenario, not the decision-maker.

Given this, a total cost of care benchmark with two-sided risk reorients some perverse incentives inherent in other cost control strategies and drives providers to target inefficient spending and emphasize high-value care options. Under a perpetual one-sided model, such care delivery transformation is purely optional. We paired the risk model with a firm fee schedule policy to ensure that no health system will have an opportunity for any future unit price increases unless it joins Blue Premier.

To emphasize the preferred path, we will not offer the status quo as an option. Instead, the options are:

  • (A) Blue Premier plus new financial and strategic opportunities in partnership with us, or
  • (B) A flat fee schedule plus intensified cost control efforts such as prior authorizations, tiering, and other traditional payer tools.

The financial conversation with each health system is bolstered by the clinical backdrop — we want Option A above to also be the obvious path for doing the right thing for patients. The nature of an ACO program provides the incentive for providers to emphasize preventive care, lower-cost interventions, the removal of wasteful spend, and longitudinal personal relationships. We found that this is invariably a point of mutual agreement with our health systems.

This approach is a change from today’s standard mode of care that often requires new infrastructure, staffing, procedures, and technology. This underlines the merits of shared savings — prevent an expensive hospitalization and free up those funds to invest upstream. However, we also recognize that the health plan must similarly change to support clinical excellence.

At the beginning of our Blue Premier conversations in early 2018, our overtures to align were met with extreme caution and reservation. We are making new promises and entering into a broader relationship with each provider, and we have to earn trust through delivering our end of the bargain. Components of this commitment, some memorialized in contract and some demonstrated during contract discussions, include:

  • Data transparency through comprehensive claims feeds coupled with advanced reports and insights;
  • Staff solely dedicated to the support of providers in Blue Premier to collaboratively identify areas of opportunity;
  • R&D partnerships for strengthening the future trajectory of the relationship, such as improving methodologies and addressing public health issues;
  • Cutting edge population health management tools; and
  • Reductions in lower-value administrative processes.

We believe that this way of paying for and delivering care can become engrained in the DNA of a market. In North Carolina, the combination of Blue Premier with the growing penetration of CMS ACO programs, a Medicaid managed care transition focused on alternative payment models, and shared savings arrangements from other payers will contribute to an environment in which the majority of many providers’ payments will be tied to value-based arrangements. Suddenly, fee-for-service is no longer the safe and available default.

Our hypothesis is that this degree of penetration will prevent a snapping back to the old ways and will instead create synergies for success for all North Carolinians, regardless of payer. We believe that this moment represents a tipping point that will move the North Carolina market toward value-based care and shift the market to think of two-sided risk ACOs, which have been merely an experiment to date, as the new standard. We believe North Carolina can be a model for the nation.

Call for submissions:

Now inviting expert articles, longform articles, and case studies for peer review

Connect

A weekly email newsletter featuring the latest actionable ideas and practical innovations from NEJM Catalyst.

Learn More »

More From New Marketplace
China's health care - global lessons at scale event information. Live broadcast April 25, 1-5 pm China Standard Time. Rebroadcast April 26, 1-5 pm ET.

Event This Thursday and Friday: China’s Changing Health Care: Global Lessons at Scale

Join us for our free livestreamed event Thursday from 1:00 – 5:00 p.m. China Standard Time (1 a.m. – 5 a.m. ET) and rebroadcast on Friday from 1:00 – 5:00 p.m. ET, hosted by Jiahui Health in Shanghai: China’s Changing Health Care: Global Lessons at Scale.

Health Care Snapshot - Chinese Health Care and U.S. Health Care

Perspective from the East: Health Care in China

Context is the key to understanding China’s health care system and its emphasis on population health.

GordonWang01_pullquote - digital health care China

Digital Health Care in China: Benefits and Pitfalls

China’s experience offers insights for integrating digital and non-digital health care services.

Dale04_pullquote_disrupting the value-based vs fee-for-service payment model

Disrupting the Payment Model

We should modernize our payment mechanisms to reflect the reality of our digitally enabled lives.

Percentage of Patients Choosing a Reference-Based Pricing Facility for Knee or Hip Replacement Surgery - 2008-2012 - value-based benefit designs

The Evidence for High-Value Benefit Designs

Innovative models are showing promise, but limited transparency and peer-reviewed research hamper expansion.

New Evidence on Stemming Low-Value and Overprescribing - Nudgind Physicians Toward Better Prescribing Practices

New Evidence on Stemming Low-Value Prescribing

New research suggests that deploying strong and surprising messages could help to address overprescribing of opioids and other drugs.

Wang01_pullquote medical devices - medical device innovation in China

Accelerating Medical Device Innovation in China

Promoting collaboration between clinicians, researchers, device-makers, and regulators.

Health Care Costs - Cost Transparency Is the Main Change Needed to Support Patients in Lowering the Cost of Care

Survey Snapshot: Is Transparency the Answer to Rising Health Care Costs?

NEJM Catalyst Insights Council members say that while transparency might be necessary, we have to change the way care is delivered.

Many Stakeholders Share Responsibility for Lowering the Cost of Care

New Marketplace Survey: Patients Lack Information to Reduce the Cost of Care

Efforts to mitigate rising health care costs have left most industry participants — patients, providers, and payers alike — frustrated at the lack of progress. While there is plenty of blame to go around, a significant open question remains: how responsible are patients for reducing costs?

Hip or Knee OA Care Management - Musculoskeletal Institute and Bundled Payment Program at Dell Medical

Bundled Payments Are Moving Upstream

Dell Medical School at The University of Texas at Austin has improved outcomes and reduced costs for musculoskeletal care with a multidisciplinary Musculoskeletal Institute and bundled payment model.

Connect

A weekly email newsletter featuring the latest actionable ideas and practical innovations from NEJM Catalyst.

Learn More »

Topics

Vertical Integration and Bold Experimentation

Four points on improving value in health care via vertical integration and aggressive experimentation.

Value Based Care

203 Articles

Disrupting the Payment Model

We should modernize our payment mechanisms to reflect the reality of our digitally enabled lives.

Medicare and Medicaid

124 Articles

“You’re Old Without Hearing Aids”— Addressing…

Hearing loss isn’t a normal consequence of aging. But it is associated with a higher…

Insights Council

Have a voice. Join other health care leaders effecting change, shaping tomorrow.

Apply Now