The Advisory Board printed an article outlining Intermountain Healthcare. This Utah-based system is at the leading edge in many ways. They have made a bold proclamation: they will pass on $2 billion in savings to their patients or lose money! Here is an excerpt from the article:
The 22-hospital system is guaranteeing that SelectHealth Share, its new health plan, will cap annual rate increases at about 4%—one-third to one-half lower than typical rate hikes for employer-sponsored plans.
Most health systems would have to skimp on care quality in order to provide such a deal, Abelson says. However, Intermountain stands apart because of its innovative efforts to track and analyze care quality. And many of its contracts are value-based: the system is reimbursed a fixed amount to care for about one-third of its patients, providing an extra incentive to keep patients healthy and costs low.
Intermountain says it will reduce SelectHealth Share's rate increases through $2 billion in savings over the next five years, including about $500 million in 2016.
The article goes on to quote Brent James talking about the program. Full disclosure, I have met Brent James at many conferences in the past and worked with him directly on a few projects.
Some of the tactics will have direct impact on Medtronic. I believe that we were one of the companies mentioned in this excerpt from the NY Times article:
Intermountain’s plan is “the first innovative thing we’ve seen in a long time,” said Dave Jackson, managing partner for FirstWest Benefit Solutions in Orem, Utah. “Share has got everybody at the table — everybody’s got accountability and got things to do.”
Intermountain has already saved money by renegotiating the cost of surgical staplers, pitting a cheaper manufacturer against another and saving $235,000 a year. It saved $639,000 a year by ensuring that heart attack patients get into the catheterization lab within 90 minutes of emergency room contact, thereby helping patients recover faster.
Here is the Advisory Board summary of the overall program (Ben Umansky):
Predictability is huge for employers right now. The idea of tying premium increases to something close to overall inflation is really attractive to a market that's seen health costs far outpacing the costs of other inputs. In fact, much of what employers are doing these days is predicated on a drive for predictability; take, for example, the move to defined contribution benefits: an employer who goes that direction knows exactly what it will pay no matter what happens downstream. Intermountain is responding to that same desire, but in a different way.
Select Health Share is the sort of provider-sponsored play so many systems are dreaming about, and this may be a lesson to other health systems about what they would have to offer in order to demand exclusivity. Select Health Share isn't trading on Intermountain's quality reputation alone, strong though it may be—this credible guarantee of predictable (and reasonable) cost growth is what many others aren't willing (or able) to offer.
This isn't something that happened overnight. If Intermountain hadn't spent years aligning governance, incentives, strategic planning priorities, and so many other factors across both the provider and insurer arms, they wouldn't be able to make this kind of play today.
I've always been impressed with how Intermountain designs its financial incentives to reflect and reinforce the system's strategic goals—from overall financial targets all the way down to individual incentives. It's a system that exemplifies "systemness"—everyone's in step—and that's so important for being able to offer this kind of value proposition to the market.
Here is a link to the Advisory Board article: https://www.advisory.com/daily-briefing/2016/02/19/intermountains-big-bet-pass-on-two-billion-in-savings?WT.mc_id=Email%7cDailyBriefing%20Headline%7cDBA%7cDB%7cFeb-19-2016%7cintermountain%7c%7c%7c%7c&elq_cid=348425&x_id=003C000001GLXTHIA5
Here is a link to the NY Times article quoted by the AB: http://www.nytimes.com/2016/02/18/business/a-novel-plan-for-health-care-cutting-costs-not-raising-them.html?_r=3
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