Sunday, August 7, 2011

Rare alliance reduces medical costs

LOS ANGELES — A rare alliance of health-care rivals — a giant insurance company, a major hospital chain and a large doctors group — has managed to reduce health-care costs through a radical new strategy: working together.

The question now is whether the alliance can serve as a roadmap for the success of other projects around the nation.

The collaboration among Blue Shield of California, Catholic Healthcare West and Hill Physicians Medical Group shaved more than $20 million in costs last year and prevented an insurance rate increase for public sector workers in Northern California.

The three partners cite evidence that the quality of care also improved: Hospital stays were shorter, readmissions dropped, and doctors and nurses kept closer tabs on patients.

Relationships between these kinds of companies typically are adversarial, with doctors and hospitals trying to negotiate higher prices for their services as insurers strive to limit what they pay out.

But driven by a mutual interest to cut costs and to be more competitive, the three devised a strategy they believed would deliver medical care more efficiently.

Skeptics worry that the partnership and others like it will put cost-cutting ahead of patient care. Health-care experts believe, however, that such experiments hold important lessons for an expected wave of similar “accountable care organizations” as part of the nation's health-care overhaul.

“The fact that they achieved substantial savings in the first year highlights the potential for the model,” said Dr. Elliott Fisher of the Dartmouth Institute for Health Policy and Clinical Practice in New Hampshire. “There are a lot of opportunities to achieve savings, even in the short term.”

The three partners began planning their experiment in early 2008 — well before President Barack Obama and Congress opened a heated national debate over how best to control spending.

Their talks centered on 41,500 members of a Blue Shield HMO who were served by Hill Physicians, whose doctors are affiliated with Catholic Healthcare West, the state’s largest hospital chain.

All of the participants got their Blue Shield insurance through the California Public Employees’ Retirement System .

“Our staffs had a history of combatting with each other through negotiations,” said John Wray, a senior vice president with Catholic Healthcare West. “We had to trust one another to make it happen. This was a very significant culture change between the organizations.”