Three states of mind about the California HFMA Conference

I was bewitched, bothered and bewildered by a seemingly unlikely catalyst: last week's Healthcare Financial Management Association's California conference.

The keynote speaker was a physician and CEO of a health plan that provides care for more than a million Medicaid enrollees. He declared the Obama Administration contained "zealots" who had enacted healthcare reform.

There was more than one motive to decamp from the conference: the rambling buffet in the lobby; the adjoining Long Beach Convention Center was a ghost town; an offshore oil well burned off natural gas nearby.

I thought about leaving early. But the managed care plans were providing a policy update, and given the cherry bombs lobbed during the opening session, it seemed too tempting to resist.

I was glad I made an appearance, but for the wrong (or actually, the right) reasons.

I learned that Blue Shield of California had launched a two-year pilot accountable care organization pilot program at the start of the year to cut costs for 38,000 Sacramento-area residents who received benefits from the California Public Employees Retirement System. It was a risk-bearing proposition: Blue Shield and fellow participants Catholic Healthcare West and Hill Physicians Medical Group would get to keep any savings from the ACO below CalPERS' 2008 premium levels. If they went over, it would come out of their own pockets.

Blue Shield had invested in an electronic medical record system that linked the region's hospitals operated by CHW's Mercy division and Hill's medical offices. Strikingly simple policies were also promulgated, such as making a follow-up physician appointment within 10 days of a hospital discharge automatic. Blue Shield also pays for the patient's prescriptions at discharge, something the plan did not do in the past.

"The hospitals mark up the drugs far higher than if the patient gets it at a Walgreens," said Juan Davila, Blue Shield's senior vice president of network management. "But paying for it is way cheaper than paying for a bed day."

The preliminary data through July has been striking: Blue Shield claimed a 4 percent reduction in hospital admissions, a 9 percent reduction in hospital average length of stay and a 24 percent reduction in hospital readmissions within 30 days of discharge. That translates to a savings of $31 per member per month, or $14.1 million per year.

"We think it's an unbridled success," Davila said, noting the projected annual savings earlier this year were only $6 million, but that the figure climbed quickly.

While that number is impressive, it's still short of the $15.5 million Blue Shield has credited back to CalPERS for the first year. Davila said the parties will continue to work on increasing the numbers--and potentially expand the ACO outside of Sacramento.

ACOs will be a staple of healthcare reform in the coming years. As a matter of fact, they're discussed constantly among industry honchos these days, not unlike the tea-leaf parsing that goes on among followers of professional sports. But as ACOs have yet to have their first full season, it's hard to predict how they'll perform.

However, if the Blue Shield ACO can achieve such numbers within a few months of launch, it suggests the ever-growing cost burden of the healthcare system may have a chance to slow over the next decade or two.

You already knew what bothered and bewildered me about the conference. Now you know what was bewitching. - Ron