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Blue Cross Blue Shield of Michigan and seven of Southeast Michigan's largest health care provider groups have formed a payment model designed to lower costs by making doctors and hospitals financially accountable for improving patients' health. 

The "Blueprint for Affordability" plan announced Wednesday by the state's largest health insurer, three Southeast Michigan hospital systems and some of the region's largest physician networks will be the nation's largest-scale example to date of "financial risk contracting." This is a practice where doctors and hospitals share in the financial risks of providing health care, according to the Blues. 

"We know health care keeps getting more and more expensive," said Todd Van Tol, senior vice president of health care value at Blue Cross Blue Shield of Michigan. "Americans pay more for their health care than any other country.

"More needs to be done. We need even stronger and more ambitious efforts to make health care more affordable." 

Organizations signing on to the plan are Michigan Medicine; Trinity Health, including Saint Joseph Mercy Health System, Mercy Health, Mercy Health Physician Partners and Integrated Healthcare Associates; Henry Ford Health System; Ascension Michigan's Genesys Physician-Hospital Organization, Partners in Care and St. Mary’s PHO; Oakland Southfield Physicians; The Physicians Alliance; and United Physicians.

"We believe this is the largest value-based payment reform of its kind in any state in the nation," Van Tol said.

"According to our data on patient volume and dollars flowing into these seven Southeast Michigan health organizations, our Blueprint contracts cover 30% of Blue Cross's membership in our commercial PPO (preferred provider organization) and Medicare Advantage PPO lines of business — that represents $4 billion in health care spending," he added. 

"This is a significant start, deeply impacting our shared populations of members and patients. We are aware of no other effort, in any other market, to achieve full financial risk contracting that runs this broad and deep across those commercial and Medicare populations."

The financial risk contracts build on 15 years of work by the Blues to reduce the costs of health care by keeping patients healthier. Doctors were previously able to earn bonuses by meeting benchmarks for quality of care. 

"Blueprint risk-sharing contracts now add a downside risk component," said Stephen Carrier, senior vice president of network management and provider partner innovation at Blue Cross Blue Shield of Michigan. "That's a level of financial accountability for managing the quality and cost of this care. 

"Physician organizations and hospitals will be measured on how well they manage the health outcomes of their patients and their total cost of care." he added.  "This is the first time we're adding downside financial risk into the equation."

Each of the participating organizations has agreed to annual targets for the cost of care, based on their total costs the previous year and the average cost of care across the state, Carrier said. Their contracts are effective on Jan. 1. 

"(At the end of each year) if an organization's total costs come in below targets, and if they meet certain quality metrics,  they will receive an additional payment. If costs cannot be managed within their target, and care quality metrics are not achieved, the organization will owe a portion back of the amount spent beyond the target."

Value-based payments have been promoted by the federal Centers for Medicare and Medicaid Services. Similar plans have been adopted by insurers and health care providers across the nation, but typically for been done on a limited basis, such as through pilot programs. 

Representatives of several of the provider organizations on Wednesday's press call said the Blueprint program builds on Blues' existing incentive programs to reduce costs by keeping patients healthier. 

"We are very comfortable negotiating contracts with upside and downside risk-sharing," said Robin Damschroder, executive vice president and chief financial officer of Henry Ford Health System. 

Michael R. Madden, president and chief executive officer of The Physician Alliance, which represents 2,300 primary care and specialty doctors in the state, said the group's physicians voted in favor of participate in the Blueprint program. 

"The Blueprint for Affordability, from our perspective, is just the next phase in the evolution of our partnership with Blue Cross Blue Sheild of Michigan," he said. 

"This is something we always assumed would come." 

kbouffard@detroitnews.com

Twitter: @kbouffardDN

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