Three-Member Health Industry Alliance Cut Costs by $20 Million

A collaboration among three health care organizations in California lowered health care costs by more than $20 million in 2010, the Los Angeles Times reports.

The organizations in the partnership are:

• The insurer Blue Shield of California;
• The hospital system Catholic Healthcare West; and
• The doctor group Hill Physicians Medical Group.

The group centered its efforts on reducing costs for 41,500 Blue Shield HMO policyholders who were served by Hill Physicians and whose physicians were affiliated with CHW.

How They Did It

The organizations began planning the effort in 2008, and senior executives from the three companies said they overcame prior conflicts to work together.

They began by sharing financial and medical data, which allowed them to identify possible areas to cut costs.

The group also made sure that if patients received emergency treatment at out-of-network hospitals, they were transferred to CHW hospitals for lower-cost care.

Outcomes

The partnership decreased hospital readmissions by 15% last year and shortened hospital stays for patients by paying greater attention to follow-up care.

By sharing financial and medical information, the groups reduced by 13% the number of elective surgeries that can lead to increased health care costs.

In addition to cutting costs, the alliance averted an insurance premium increase for some public-sector workers in Northern California.

Blue Shield recouped $15.5 million of the savings based on an agreement it had made to CalPERS not to increase rates for the 41,500 policyholders involved in the collaboration. The other $5 million in savings was shared among all three partners.

Reaction

Skeptics argue that such partnerships place more emphasis on cost-cutting strategies than on patient care.

However, health care experts say such alliances can provide important lessons for accountable care organizations, which are part of the federal health reform law's effort to control medical spending (Helfand, Los Angeles Times, 8/1).