Scripps Health’s recent agreement with Qualcomm Inc. to build and manage a customized medical network represents San Diego’s boldest step yet toward a Medicare-born model that holds health care providers financially accountable for lowering costs and improving care.
Starting Jan. 1, Scripps will coordinate medical care for probably thousands of the telecom giant’s employees and their dependents.
The deal is the first instance of a San Diego employer contracting a health system to provide medical care to its workers and their dependents under a so-called accountable care organization. San Diego has Medicare ACOs, and one other locally based health system besides Scripps — Sharp HealthCare — offers an HMO product. But none goes as far as Qualcomm’s arrangement with Scripps in offering ACO-type care directly to local workers.
At the heart of the deal is a system of risks and incentives that, under the circumstances, could prove critical to Scripps. The locally based health system now will have to improve service and physician performance while also lowering Qualcomm’s costs — or face penalties.
Close Cooperation
While Scripps is not new to the health care delivery model known as accountable care organizations, its experience with ACOs’ shared saving arrangements has been limited to a Medicare product serving local seniors. It has worked closely with insurance companies, and has its own HMO, but the company enters new territory by working directly with a large employer self-insuring its workers’ health benefits.
The two companies plan to meet regularly to review patient feedback and physician performance measures with an eye toward making adjustments.
Observers familiar with the ACO model say the Qualcomm-Scripps project is well worth watching. If it succeeds, they say, more health systems may respond by offering their own ACOs to large employers, cutting out traditional insurers and introducing a new kind of health plan option to local businesses.
There’s no guarantee the new ACO will achieve its “triple aim” of lower cost, higher quality and better health, said John Schmitt, an Atlanta-based consultant whose company, Reliance Consulting Group LLC, supports and develops strategies for ACO contracting. He noted only about a quarter of Medicare ACOs have achieved shared savings.
“There will be groups watching, you know, to see if this does produce results,” Schmitt said. “If it does, then you will see a lot of activity on that front.”
Employees Have Other Choices
For Qualcomm, locally based with 12,186 local employees in 2016, according to the Book of Lists, the agreement is an innovative strategic alliance offering its workers and their families concierge-level assistance, electronic messaging with medical professionals, published prices for common procedures and a choice of plan levels. Such a benefit, in addition to possibly pinching costs, is seen as making the company more attractive to top talent.
It’s unclear just how many Qualcomm employees will choose to sign up for the program. Its other more conventional options include what is known as qualified deductible health plans offered by UnitedHealth Group Inc. and Kaiser Permanente.
Qualcomm sees the new ACO as accelerating improvements in patients’ health care experience, value-based payment and joint monitoring of health system performance against targets.
Teresa Wolownik, a senior director at Qualcomm, said the company funds its own health plans partly because it considers itself large enough to absorb fluctuations in claims, but also because it doesn’t want to pay insurers’ risk charge, profit and taxes.
The Right Model?
Scripps, with five acute-care hospital campuses and 27 outpatient centers and clinics serving 700,000 patients per year, is wagering it has the right model and the Medicare ACO experience to make the project work.
“Building on our patient-centered approach and physician-led accountable care model, Scripps is well-positioned to work with Qualcomm to provide its employees and their families with exceptional care and an outstanding experience at a great value,” Scripps President and CEO Chris Van Gorder said in a June 7 news release announcing the agreement.
Success with the ACO product would be a welcome development for Scripps. The San Diego Padres baseball team abandoned Scripps for UC San Diego Health in January, picking a new health care provider after more than three decades of loyalty.
Also earlier this year, as Scripps launched a multimillion-dollar electronic medical records system, the $224 million proton therapy center it operates on contract was put up for sale amid the owner’s bankruptcy proceedings.
In the spring, Scripps sold a Hillcrest hospice it had rescued from bankruptcy in 2013, pledging at the time to preserve it as an inpatient hospice. Scripps ultimately let go of the property when it found the use unsustainable at the site.
More Doctors
Barbara Price, chief executive of Scripps’ combined commercial and Medicare ACO, described the ACO effort as a custom product formed through collaboration. Scripps will pool its roughly 800 foundation physicians, who make up the bulk of its existing ACO, and bring on an additional 500 to 700 independently contracted doctors to cover Qualcomm’s workforce, which essentially spans the county.
The project will be more high-touch than Scripps is used to, she said. To guide members through the process, Scripps expects to employ call center workers — some newly hired, some reassigned from within the 15,000-employee company — to help in scheduling and cutting wait times.
Scripps won the contract through a bidding process that began a year and a half ago and entered a series of competitive rounds late last year.
The company has relationships with employers but has never worked with one on such a large scale. It expects to learn lessons that can also be applied to products it hopes to market to other local employers.
The parties declined to discuss details of the financial arrangement or its time length. Scripps did say, however, that the agreement offers what is known as value-based reimbursement, which compares costs against historical levels while also taking into account quality of care.
In a conventional ACO, medical providers are rewarded by an insurance company or government payer for cost savings and good care. In this model, Qualcomm and Scripps would split any savings.
Scripps aims to meet quality improvement goals by closing care gaps, having the most appropriate provider render the right care at the proper time and place. Part of the idea is to head off avoidable problems and minimize the cost of emergency medicine. Some of this will involve coaching physicians on new best practices, Price said.
Looking for New Care Models
The ACO is less novel nationally than it is locally. Most commercial ACOs are arrangements between insurance companies and medical providers, though it’s not unheard of nationally for an employer to work directly with a health system.
But it’s “potentially a game-changer for the San Diego health care market,” said Shawn Pynes, a principal and director of the employee benefits division at insurance agency Barney & Barney/Marsh & McLennan Agency LLC.
He said the move has the potential to boost competition in the local market as other medical providers “look for ways to develop unique partnerships that differentiate them as a provider of choice.”
Whether the ACO succeeds could come down to important contract details such as trend rates and risk adjustments, said Alex Tava and Andrew Brantner, principals at Cirdan Health Systems & Consulting, a St. Paul, Minn.-based company specializing in actuarial and financial consulting for ACOs.
Tava said one of the biggest risks ACOs take tend to relate to employer group size — probably not a concern in this case because Qualcomm should have enough workers and their dependents to even out variables. Other risks include the standard risk that members will get sick, he said, and the possibility that the concierge-level service runs up costs too high.
But he said it’s likely Scripps’ Medicare ACO experience will help, and the high-touch model could add a new level of patient involvement.
“We’re certainly very interested to see what happens out there in San Diego,” Brantner said.