Anthem Succeeds In Bid to Cut Costs

Sometimes, paying more upfront can cost less in the long run.

That has been the case for a collaborative effort of the state’s largest for-profit health insurance company and a handful of doctor groups that worked to coordinate the care of 200,000 patients with multiple chronic conditions.

Today, Anthem Blue Cross of California is announcing that it saved nearly $8 million during a yearlong period ending last June by emphasizing preventive care. It paid participating physicians extra money upfront to devote more attention to patients with two or more chronic diseases such as diabetes, asthma and congestive heart failure.

Anthem did not provide the total amount spent on the patients, making it impossible to determine just how much savings the $8 million drop represents.

The company did say the program resulted in a 7.3 percent drop in hospital admissions per 1,000 patients from the six large medical groups that were involved.

In San Diego County, both medical groups connected to Sharp HealthCare participated, with more than 1,000 physicians and more than 20,000 patients enrolled.

Dr. John Jenrette, chief executive of Sharp Community Medical Group, said investing in additional care coordination helped the two Sharp groups decrease the amount spent on related health services by about 2 percent combined.

“You’re reaching out and offering a helping hand. You’re trying to get them to manage their illnesses in areas like diet, exercise, follow-up appointments, medication adherence. … You’re creating a relationship to help them improve their care,” Jenrette said.

Dr. Steven Green gave a specific example of this preventive approach.

“We’ll reach out to diabetic patients if we see that they are not coming in frequently enough to effectively manage their disease,” said Green, chief medical officer at Sharp Rees-Stealy Medical Group, the other Sharp participant in the Anthem program.

Such efforts reflect the main long-term goal in health-care reform: reducing cost while increasing quality.

The government projects a 5.7 percent increase in health care spending through 2023, outpacing growth in the nation’s gross domestic product. By 2023, health care is expected to reach 19.3 percent of GDP, compared with 17.2 percent in 2012.

Projects like Anthem’s are critical in the overall fight to rein in medical expenses, said Gerald Kominski, director of the UCLA Center for Health Policy Research.

“Any savings we can achieve are important because they contribute to this ongoing notion we have that we need to bend the cost curve,” Kominski said. “I’d say that these results are encouraging. They’re suggesting that in a relatively short time period, they’ve been able to get some results.”

Those results come from reducing the number of unnecessary tests and procedures ordered by physicians, as well as from treating chronic illnesses sooner so they do not require more serious intervention — such as hospitalization — later on, said Dr. Michael Belman, an Anthem medical director.

In 2009, the Institute of Medicine estimated that unnecessary health services waste $210 billion annually in the United States.

Anthem’s program is technically called an “accountable care organization,” a term also used for a government program that asks doctors to concentrate on lowering costs and boosting quality for a targeted patient population.

If less money is spent on care than expected and quality measurements show that patients still fared well, the participating physicians get to split the financial savings with the government.

Anthem’s program is similar, offering a chance to share savings with its doctors.

Belman stressed that medical groups must meet strict quality measures for all of the patients involved before any savings are tallied. Otherwise, physicians might be tempted to save money simply by denying essential care to patients.

“It’s important to understand that this is not rationing of care,” Belman said. “This is reducing care that may not be necessary or beneficial to patients in the first place.”

In California, Anthem vies with other large insurance carriers such as Kaiser Permanente for customers.

It is no secret that a major way these companies compete is on the cost of premiums they offer to their members. Belman said the accountable care organization project might eventually give Anthem an edge in the market.

“The ultimate goal is to bring down the cost curve so that we can bring premiums down and remain competitive in the marketplace,” he said.

Expenses don’t necessarily go down in a straight line. While Anthem’s results showed decreases in spending on inpatient care, office visits and outpatient services, there was a 4.2 percent increase in generic-drug expenses.

Anthem said this increase was a direct result of getting patients with chronic illness to take better care of themselves. For example, asthmatics given consistent medical support might use their inhalers more often. Diabetics with proper intervention will use insulin more regularly.

Kominski, the UCLA economist, said Anthem’s rise in drug costs tracks with results seen in other similar projects.

“There are several studies that show this kind of effect,” he said.

For the two Sharp medical groups, first-year participation in Anthem’s program was not a panacea.

Jenrette, the Sharp Community Medical Group executive, said the additional care-coordination payments and share of savings it received from Anthem were not enough to cover increased costs incurred for greater patient-management activities.

“Early on, with a startup, you often don’t cover your investment in the first year. But we’re hoping that changes in the second and third years,” Jenrette said.

He added that Sharp finds overall value in participating in accountable care organization programs.

“I think you will see this kind of project eventually turn into a new kind of insurance product that offers somewhat lower premiums if patients are willing to participate in care management,” Jenrette said.

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