FARGO -- Blue Cross Blue Shield of North Dakota has signed contracts with two large health systems that will begin paying providers based on rewarding better patient outcomes.
The shift -- aimed at controlling costs and improving the quality of care -- alters the traditional "fee for service" method of payment that rewards volume of services without regard to results.
So far, contracts have been signed with Sanford Health in Fargo and Altru Health System, based in Grand Forks. Together, they provide care for 65,000 Blue Cross Blue Shield of North Dakota members.
Blue Cross Blue Shield of North Dakota also is pursuing "total cost of care" contracts with the state's four remaining large integrated health systems, including Essentia Health, which combine multispecialty clinics with hospitals.
The six large health systems combined provide care for about 200,000 Blue Cross Blue Shield of North Dakota members, or 65 percent to 70 percent of the insurer's total membership.
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The shift will be gradual, with the goal of decreasing health care costs by half a percent -- or $5 million to $6 million a year -- in a closer collaboration between the insurer and providers.
"We're all just dipping our toes into what this looks like," said Sharon Fletcher, the North Dakota Blues' senior vice president for provider relations, reimbursement and medical management.
Three-way partnership
Over the past seven years, health care costs in North Dakota have increased an average of 8 percent annually, a rate far greater than general inflation.
The latest trend figures, for group health insurance renewals through July, are averaging 3.8 percent increases, according to company figures, though the amount can vary widely between groups.
"We want to start bending that trend down," in order to make health care delivery sustainable, said Charley Cichy, the North Dakota Blues' vice president for provider relations and reimbursement.
Under the new contracts, Blue Cross Blue Shield and health systems share in the costs, and therefore share in the benefits from reducing costs and improving patient outcomes -- a result that also benefits the patient, officials said.
"This truly is and needs to be a partnership between all three parties," Martha Leclerc, Sanford's vice president of strategic payments, said of alignment of the insurer, providers and patients.
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"I don't look at this as just a cut in reimbursement," she added. "This is a way of managing the costs in a way that's a win-win for all the parties involved."
Heather Strandell, Altru's administrative director of care management, agreed.
"I see great benefit," she said. "This really is based on our quality outcomes."
As an example, part of the payment Blue Cross Blue Shield makes to providers will include rewards for exceeding certain benchmarks, such as blood pressure or diabetes monitoring or cancer screening.
National trend
The "shared cost" approach is part of a national trend among insurance companies and medical providers gearing up to collaborate through what are called accountable care organizations under the national health reform legislation.
It's also an outgrowth of collaborative efforts between the North Dakota Blues and medical providers to better manage costly chronic diseases, such as diabetes and asthma.
Sanford is now in the second year of a similar contract with Blue Cross Blue Shield of Minnesota, and Altru is now in discussions with the Minnesota Blues to reach a similar agreement.
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"I think our region of the United States is really pioneers," in adopting "cost sharing" partnerships between insurers and medical providers, Altru's Strandell said.
Altru President Casey Ryan said the system was already working under similar agreements with other insurers.
The financial risk to the medical providers in the "shared cost" approach is low, and the collaboration will evolve over time, the Blues' Fletcher said.
"This is really a starting point for all of us," she said. "This is an exploration."
The Forum and the Herald are both owned by Forum Communications Co.
