Blue Cross to link hospital pay to performance

Georgia’s largest health insurer will peg its regular increases in hospitals’ payments to the quality of care they provide.

WellPoint, the parent company of Blue Cross and Blue Shield of Georgia, is replacing its system of paying hospitals annual increases with a method that features rewards. Under the new method, a hospital will get an annual increase only if it scores well on the insurer’s quality scores.

“To get any increase, it has to be earned,’’ Samuel Nussbaum, chief medical officer for Indianapolis-based WellPoint, told the Wall Street Journal.

The decision would affect 1,500 hospitals in 14 states, including Georgia. WellPoint has about 34 million members nationally, including 2.8 million covered by Blue Cross and Blue Shield of Georgia.

Other large insurers have tied hospital payments to better medical outcomes for patients, but WellPoint’s initiative has the distinction of being mandatory and nationwide, the Wall Street Journal said. (Here’s a link to the story, which requires a WSJ login or subscription.)

The switch demonstrates that insurers, including Medicare, are getting more serious about linking reimbursements to medical quality and errors in treatment.

The Centers for Medicare and Medicaid Services has plans to reduce payments to medical providers for safety problems, and to reward providers for good quality of care, under the health care reform law.

Currently, Blue Cross of Georgia rewards doctors and hospitals under voluntary programs for providing high-quality care, said Cheryl Monkhouse, a spokeswoman for Blue Cross and Blue Shield of Georgia.

“As hospital partners renew their contracts with us, we will strive to ensure any rate increases are linked to hospital improvements in safety, quality, patient care and value,’’ Blue Cross said in a statement Tuesday. “It is the right direction to take to create a better, safer and more affordable health care delivery system for all Americans.’’

The WellPoint quality formula will be based 55 percent on patients’ medical outcomes, 35 percent on patient safety measures and 10 percent on patient satisfaction.

The company’s goal is to have all hospitals participate in the program when they renew their contracts, Blue Cross said. If hospitals don’t perform well and demonstrate quality improvements, they may see pay decreases, the company said.

The WellPoint change is part of a pay-for-performance trend in health care that appears to be accelerating, said Bill Custer, a health insurance expert at Georgia State University.

Under the traditional medical model, a doctor or hospital would be paid by the quantity of medical services delivered to a patient.

Now, under Medicare and WellPoint initiatives, Custer points out, ‘’you’re not paying for the number of services.’’ Hospitals will be rewarded for producing the best medical outcomes, and those that fail to do so will be penalized, he said.

Custer said other insurers are likely to follow WellPoint’s lead.  “This could make health care more cost-effective,’’ he said. It also will put pressure on medical providers, and will probably spark more integration among doctors and hospitals to control the overall care of patients.

“It’s a tough situation for small rural hospitals, which have fewer resources to combine and integrate,’’ he added.

About 500 hospitals are now participating in a voluntary Wellpoint quality program that links quality to payments.

WellPoint estimates that the mandatory reward program will reduce its inpatient-care costs of about $25 billion a year by 3 to 5 percentage points annually over time, the Journal reported.