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Highmark forms alliance in bid to cut health costs

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Thursday, July 18, 2013, 1:06 p.m.

Highmark Health Services will begin to pay hundreds of Western Pennsylvania doctors higher rates if they keep patients out of the hospital, a strategy the company says will reduce health costs over time.

The state's largest health insurer said on Thursday that it is setting up an Accountable Care Alliance and will invest an undisclosed amount of money to pay doctors incentives for keeping patients healthy.

The bonus program will begin at Allegheny Health Network, Pittsburgh's second-largest hospital system that Highmark built by acquiring hospitals this year.

The alliance is similar to Medicare's Accountable Care Organizations, but with a major distinction.

Accountable Care Organizations seek to improve quality and lower costs but they employ a so-called full-risk model in which the hospitals and doctors receive a set amount of money each year to treat Medicare beneficiaries. The government shares in any savings. If the organization spends more, it absorbs the cost.

“We're not even sure if that is the right model,” said Mike Fiaschetti, president of health markets for Highmark Health Services, referring to the Medicare program. “The last thing we want to do is give any incentive to not deliver care.”

“We've learned from history, and we need the correct infrastructure in place before we put the hospitals and physicians at risk,” said Dr. Paul Kaplan, senior vice president of provider strategy and integration at Highmark.

Highmark's Accountable Care Alliance may evolve and expand over three years to become more like the government's model, Kaplan said. Or, it may adopt different incentives if it finds something that is more effective.

Both models attempt to reform the way doctors and hospitals are paid as insurance companies and the government look to reduce health care spending. Currently, medical providers are reimbursed for each test, visit or procedure, which encourages overspending. By focusing on keeping patients healthy, so-called “pay-for-value” approaches may reduce health costs in the long term.

Highmark's alliance, which includes six Allegheny Health Network hospitals around Pittsburgh and about 500 primary care physicians, will pay doctors bonuses for performing specific activities for which they aren't reimbursed but can keep patients' illnesses from getting out of control. Some examples, Kaplan said, are coordinating with the colleagues to avoid duplicating tests and following up with patients with chronic diseases to make sure they're taking medications regularly.

It debuts just days after the Centers for Medicare & Medicaid Services said that 13 of 32 Accountable Care Organizations produced savings during 2012. Two organizations lost money.

There are no Accountable Care Organizations in Western Pennsylvania, according to the agency.

Fiaschetti declined to say how much Highmark plans to spend on incentive payments to doctors, which could be 20 percent to 30 percent over the typical reimbursement. But he said the insurer expects to save 3 percent to 5 percent in annual claims expenses once the alliance is operating.

Though Highmark will spend more on doctors, it expects to save money through fewer hospital admissions and readmissions and fewer emergency room visits, especially for people with chronic conditions, Kaplan said.

Highmark expects to expand the alliance to physician specialists and other hospital systems in Pennsylvania, Delaware and West Virginia, Fiaschetti said.

Highmark is talking with five hospital systems in central Pennsylvania and the Lehigh Valley and expects those systems to join the alliance by Jan. 1, he said.

Alex Nixon is a Trib Total Media staff writer. Reach him at 412-320-7928 or

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