St. Luke's and SelectHealth take a chance on cost-control

The health system says its plan with the Utah insurer will revolutionize care.

adutton@idahostatesman.comApril 9, 2013 

Idaho's largest hospital operator is betting that it can shrink medical bills enough that some of its patients will see lower health insurance premiums - and enough that St. Luke's won't end up losing money.

St. Luke's Health System announced last fall that it was bringing insurer SelectHealth into Idaho with a goal of changing how health care is paid for. St. Luke's would be rewarded for high-quality, efficient care - instead of getting incentives for churning out office visits, labs and procedures.

The agreement, at its most basic, gives St. Luke's the ability to keep whatever premium dollars remain after all its claims and overhead costs are covered. St. Luke's would put that leftover money toward the following year's rates that it charges SelectHealth. That, in turn, would bring down premiums for policyholders.

According to St. Luke's officials, the insurance plan they have created with SelectHealth will eventually work in unison with planned incentives for providers to slow the growth in health care spending.

The first people covered by SelectHealth in Idaho were St. Luke's own workforce of more than 11,000 people. They and their families currently make up 19,000 of the total 22,000 members that SelectHealth is covering under this arrangement.

The plan is limited to health care providers in the BrightPath network. For SelectHealth members, that network includes St. Luke's, Elks, St. Luke's-affiliated and other independent providers, including physicians with West Valley Medical Center and companies such as Norco.


Because St. Luke's can now potentially capture any leftover revenues, "We're 100 percent incentivized to look at all the things that are done," says Jeff Taylor, chief financial officer and vice president of St. Luke's Health System.

Examples of the changes he foresees:

• A patient has a question. The doctor currently has a money-making incentive to have the patient make an appointment and come in for an office visit, because the doctor can then charge the insurer for a visit. Under the new system, Taylor says, the doctor is more willing to answer the question via email or phone. The money saved by doing that could go back to St. Luke's.

• St. Luke's decides a procedure, such as a back surgery, is no better for the patient than a lower-cost procedure, such as physical therapy. Both St. Luke's Health System and its surgeons now have a financial incentive to go with the back surgery, because they can charge more for it. Under the new system, that incentive is flipped; instead of earning more for performing a surgery, St. Luke's could earn more by not doing it.

The agreement between St. Luke's and SelectHealth requires "data transparency," says Spencer Sutherland, spokesman for SelectHealth. That means everyone involved - doctors, the health insurance company and members, including employers who offer SelectHealth plans to employees - can share aggregate claims data, best practices and other information.


Other insurance plans have tried an approach similar to the one SelectHealth and St. Luke's are taking. They've had varying levels of success.

Blue Cross of Idaho launched its ConnectedCare health insurance plan last spring. That plan's network includes Saint Alphonsus Health System and its affiliated providers. It's a framework for some of the insurance products that Blue Cross plans to offer next year in the state health insurance exchange, a marketplace for insurance required under the federal health care reform law.

About 800 to 1,000 people have enrolled in the ConnectedCare plan, says Jeff Crouch, vice president of provider services for Blue Cross of Idaho.

Under that plan, member premiums basically go into a pool shared by Blue Cross and Saint Alphonsus. At the end of the year, any leftover revenues are shared with both Saint Alphonsus and Blue Cross, instead of just Saint Alphonsus. The insurer says it puts any leftovers toward premiums for the following year.

"We think the policyholder should [share in] the savings," Crouch says.

He says it's too early to tell how well the plan is performing. It would need 15,000 to 20,000 members before showing any statistically sound results, he says.

Blue Cross says it offered to create the same kind of ConnectedCare plan for St. Luke's, but the two businesses couldn't agree on how it would work.

Crouch adds that Blue Cross has had a shared-savings program in place with St. Luke's since the mid-1990s through its Medicare Advantage plan.

"In many years, there's a surplus," Crouch says. Those savings are shared with St. Luke's, he says.


What if St. Luke's doesn't lower costs, but instead ends up charging more? The contract gives St. Luke's the leftover revenues, but what about any unexpected overages?

SelectHealth can handle that, says President and CEO Patricia Richards.

"We're a very strong, well-capitalized company," she says.

But if they don't actually end up saving money and stabilizing or reducing premiums, she says, "we would have to come together and say, 'What are we going to do to change the underlying cost structure?'"

Richards says changes could involve payment rates, incentives and the insurer's administrative costs.


Richards says this arrangement is a big change, moving away from the "fee for service" payment model to one that pays for performance.

The plan "starts to link part of [physicians'] compensation to quality results, patient satisfaction, total cost of care management and overall efficiency," she says. "It's a new vehicle, a new way to work with [an insurance company]."

It will take a while to get there, though. The plan is in its first year, and it will take at least a year before St. Luke's is set up to start reaping the rewards, Richards says. The first year is a time to determine what the "status quo" is like, giving everyone an idea of where to set St. Luke's cost-savings goals.

The system also is taking a risk, because it's agreeing to keep a significantly lower margin in the second year if it doesn't hit its cost-saving target.

Richards adds that the new federal provisions for health insurance coverage that kick in next year will influence those goals as well.

"The best indicator of whether we are successful or not is the premium, and the year-over-year premium increase," she says. "We probably won't reduce the total cost of care, but we [should be able to] flatten it."

Audrey Dutton: 377-6448

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