DETROIT — Trinity Health-Michigan and Blue Cross Blue Shield of Michigan are implementing a first of its kind reimbursement arrangement that moves hospitals away from traditional fee-for-service payments.

The focus of the new reimbursement model is on better hospital-specific efficiency and better population health outcomes achieved by the hospitals working in close concert with affiliated physicians.

“The current fee-for-service approach to paying hospitals is failing to improve care and lower its cost,” said Blues president and CEO Daniel J. Loepp. “Trinity Health is a visionary leader in its industry, and we are very pleased that they are joining with the Blues to align payments with their performance in achieving successful health outcomes and better hospital efficiency.”

Added Larry Warren, interim president and CEO of Trinity Health: “We pride ourselves on being innovative at Trinity Health so that we can provide better, more effective and efficient care for our patients. Working with the Blue Cross team to create a first of its kind value-based arrangement that we can now execute is inspirational.”

The arrangement covers a three-year period and is an outgrowth of Trinity Health’s agreement in 2012 to partner with Blue Cross Blue Shield of Michigan on a new value-based reimbursement model to pay for hospital services. To support the enhanced performance under the contract, BCBSM and Trinity Health are currently collaborating to create a shared performance management system and work processes that more fully integrate clinical best practices into all facets of care delivery.

“It is exciting to move from an idea to actually implementing an approach that will serve to align the interests of the patients, providers and payers to create value for all parties involved in the care delivery process,” said Ben Carter, Trinity Health senior vice president and chief financial officer.

“The current system is best described as fee-for-service without a focus on improved health outcomes,” said Susan Barkell, BCBSM senior vice president for Health Care Value. “Insurers pay for most every treatment, no matter how effective. But we don’t pay physicians and hospitals for some things that really improve patient health, like proactively contacting people about their follow-up care or medication compliance. We are working with Trinity Health to usher in a new era of paying for the most effective care possible for people.”

The reimbursement arrangement will be launched at Mercy Health Partners hospitals and Saint Mary’s Health Care in west Michigan. Other Trinity Health hospitals will move under the new reimbursement arrangement in July. This will facilitate closer collaboration already under way between the hospital system and its physician partners to improve population health. The arrangement rewards the hospitals with a share of the savings achieved when hospitals and physicians successfully coordinate the delivery of care to enable efficient and effective treatments, eliminate redundancies and errors in care and prevent re-hospitalizations.

“Under national health care reform, the federal government also is shifting to a value-based reimbursement arrangement that focuses on paying for more effective use of medical services and outcomes rather than units of service,” said Jeff Connolly, BCBSM president for West Michigan operations. “Fee-for-service reimbursement does not account for quality or value. It has been a significant factor in the huge growth of health care costs over the last decade – costs that are now unsustainable. It’s time to change what isn’t working, and Trinity has joined the Blues to move this change forward responsibly here in Michigan.”

The arrangement will provide hospitals funding for infrastructure improvements needed to better coordinate care between the hospitals and their physician partners. Since last year, Trinity Health has been working with their provider partners in the community to develop and implement an infrastructure plan that includes an all-patient registry system that allows caregivers on the hospital and physician side to have access to the patients’ records. This promotes coordination of care, improves care quality, and also helps avoid misuse and overuse of tests and services.

The next step in the process is to identify cost efficiencies at the hospital and in the population that is treated by the hospital and its physician partners. Trinity Health and its physicians have established milestones to ensure infrastructure work continues along with funding through 2015.

“This new agreement will not only benefit our patients, but also provide savings for employers. With the insurers as partners, we will be able to improve health and reduce cost. This is an innovative approach to both,” said Roger Spoelman, Regional President and CEO, Mercy Health and Regional Executive Trinity Health-West Michigan.

Trinity Health regional health systems and hospitals in Michigan are:

Mercy Hospital Cadillac
Mercy Hospital Grayling
Mercy Health
Mercy Health Partners, Hackley Campus
Mercy Health Partners, Muskegon Campus
Mercy Health Partners, Lakeshore Campus
Saint Mary’s Health Care Grand Rapids
Saint Joseph Mercy Health System
Chelsea Community Hospital
St. Joseph Mercy Ann Arbor
St. Joseph Mercy Livingston
St. Joseph Mercy Oakland
St. Joseph Mercy Port Huron
St. Mary Mercy Livonia

The Blues have 4.4 million members in Michigan.

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