Healthcare reform…the private-sector way

The following is an excerpt of JHC’s Executive Interview with William Patten, divisional vice president of professional network contracting, Blue Cross and Blue Shield of Illinois. For the full article, visit

It’s true that news about healthcare reform often centers on what Medicare and Medicaid is doing. But the Centers for Medicare & Medicaid Services isn’t calling all the shots. The free market is doing its fair share.

Commercial payers such as Blue Cross and Blue Shield of Illinois aren’t waiting to see what shakes out in Congress and the courts. They’re pushing ahead with their own version of healthcare reform, using many of the same principles as those championed by the feds, such as physician/hospital alignment, pay-for-performance and value-based purchasing.

“Regardless of what happens to the [healthcare reform] law, I think the ship has already sailed,” says William Patten, divisional vice president of professional network contracting, Blue Cross and Blue Shield of Illinois, in a recent conversation with the Journal of Healthcare Contracting. Patten doubts the law will be overturned. But it really doesn’t matter. “Providers and payers are already moving in the direction of paying for value and outcomes, vs. paying on a fee-for-service basis,” says Patten, who is responsible for contracting with physicians and medical groups. “Blue Cross and other payers have been thinking about this for a long time.”

Physicians and hospitals: How aligned?

Hospitals and hospital systems have been working on consolidation for some time. “Now we’re seeing them work feverishly to align themselves with high-quality physicians – particularly primary care physicians  – in their markets,” notes Patten. Physicians and hospitals are banding together to form accountable care organizations, not just to care for Medicare patients, but to participate in programs with private payers as well. “But the primary care physician can only participate in one accountable care organization, so they will have to choose,” he points out. “That’s why hospitals and hospital systems are frantically trying to make sure they get the best primary care physicians to align with them.”

The goal is clinical integration of inpatient and outpatient care, says Patten. And while the majority – perhaps as many as 80 percent – of hospitals and hospital systems are actively engaged in pursuing this goal, a much smaller fraction – perhaps 20 percent – have been successful in pulling it off. “So we have a long way to go,” he says.

Hospitals and physicians have worked alongside each other – but in separate silos – for years. So why the push for integration today? “There’s obviously a crisis on how to pay for healthcare, as more of the GDP has been gobbled up by it,” says Patten. The final straw was the insistence by employers that costs be cut. “I think they were the driving force behind a lot of the changes taking place,” he says.

The push for better care

Commercial payers are driving plenty of change as well. Two concepts that Blue Cross is championing are that of the medical home and intensive outpatient care, says Patten.

By “medical home,” Patten is referring to larger medical practices that coordinate all the care for their patient population, with a particular emphasis on those in need of chronic care. “The intention is to reduce the number of unnecessary emergency room visits and inpatient admissions by providing more after-hours access to care, and by providing more coordinated and intensive outpatient care.”

Intensive outpatient care demands that providers focus on that segment of the chronic-care population that is driving the highest costs, such as those with multiple chronic diseases. “You’re doing intensive case management,” he says. “Primary care is assisted by RN case managers, who are doing a lot of the outreach.”

Blue Cross is also very committed to pay-for-performance, and has been for years, says Patten. The company incentivizes medical groups participating in its Chicago-area HMO to provide a number of preventive services, including immunizations, mammography screening, colonoscopy screening and more. Last year, the insurer paid $72 million to medical groups to reward them for meeting certain quality standards.

“Fee-for-service won’t go away,” says Patten. “It will be a long transition. The new models are just starting.” Still, change is coming.

Although he understands that HMOs have received negative press as relentless cost-cutters, Patten takes exception to the stereotype. “The principles of a good HMO are the same as a good accountable care organization – patient-centeredness, coordinated care and case management,” he says. By adhering to those principles, Blue Cross’s HMO has gathered more than 800,000 members and has captured 50 percent of the Chicago region’s HMO market share.

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