Intermountain's Big Bet

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

The system is the star

Original post:  Aug 20, 2015

At the Healthcare Transformation Group (HTG) meeting over the past few days, we heard from the CEO of Geisinger Health System (GHS), Dr. David Feinberg. As is his right, he proudly extolled the many virtues of his health system. I found some very interesting pieces that I thought you should hear about, too.

Dr. Feinberg started off humbly. He explained about his first visits to his far-flung clinics in central Pennsylvania. During one visit in the heart of Amish country, the director pointed out a hitch rack. He thought it was some procedural item, and asked what it did. The director calmly explained that this was where the Amish would tie up their horses when they would come in for a visit!

He talked about one of the key measures Geisinger watches carefully. It is the "O to E" ratio. The O stands for "observed" while the E stands for "expected". For any given group of patients, there is an expected mortality rate. That represents the E in the ratio. The O represents how many of the patients Geisinger served actually died. If the observations match the expectations exactly, your ratio is 1.0. If you go above 1.0, that means you are doing worse than average. If you go below, you are doing better than average. 0.7 is considered a good score. In May 2015, the entire Geisinger system had an O to E ratio of 0.5!!

GHS also offers some very interesting twists. They have a program called "Proven Heart". They have refined their work to such a degree that they offer what the NY Times has called a "warranty" on their heart procedures. Here is a link to an article that discusses this program:  http://www.nytimes.com/2007/05/17/business/17quality.html?_r=0 Here is an excerpt from that article:

The group, Geisinger Health System, has overhauled its approach to surgery. And taking a cue from the makers of television sets, washing machines and consumer products, Geisinger essentially guarantees its workmanship, charging a flat fee that includes 90 days of follow-up treatment.

Even if a patient suffers complications or has to come back to the hospital, Geisinger promises not to send the insurer another bill.

....

In reassessing how they perform bypass surgery, Geisinger doctors identified 40 essential steps. Then they devised procedures to ensure the steps would always be followed, regardless of which surgeon or which one of its three hospitals was involved.

From screening a patient for the risk of a stroke before surgery, to making sure the patient has started on a daily aspirin regimen upon discharge, Geisinger’s 40-step system makes sure every patient gets the recommended treatment.

....

When the system began, Geisinger was performing all 40 steps for bypass surgery only 59 percent of the time. Now, an operation is canceled if any of the pre-operative measures have been forgotten. For the last seven months, Geisinger says, its teams have managed to have a perfect record in following all recommended steps for surgery and follow-up care.

The program has been so successful, Wal-Mart actually will allow employees who require heart surgery to have it done at GHS instead of a local hospital without any co-pay. They will actually pay for the patient and a companion to travel to GHS and have the procedure. Once there, GHS typically finds that about 40% of the patients do not require surgery! This results in enormous savings for everyone.

Dr. Feinberg attributed the ability of GHS to get this type of result to a special culture. In this culture, he notes that the system is the star (not the individual clinician).

GHS is actually considering a full guarantee on all of their services. They are experimenting with a model they call "Proven Experience". I'll try to keep an eye out to see how it goes!