Alternative payment models: Two medical group CEOs share keys to success

Doctor patient

Though alternative payment models require providers to take on many of the tasks traditionally done by payers, if executed well, they can improve care quality and be a boon for business, the top executives of two healthcare organizations said Tuesday.

John Kirk

“We really believe in this, and we think it’s better medicine,” said Pioneer Medical Group CEO John Kirk during a session at the Health Care Payment Learning & Action Network Summit, held at the Marriott Wardman Park hotel in the District of Columbia.

Kirk’s organization, an employed-physician multispecialty group comprising 61 providers in Southern California, now gets 82 percent of its revenue from capitation, he said. It calls its approach a “coordinated care model.”


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Capitation--or an upfront, per-member, per-month payment for providing medical services for a set population for a set time period--is the core financial element of that model, Kirk said. That payment was originally calculated just by age and gender, but now includes risk scores for individual patients, which is vital when it comes to negotiating rates with health plans. At the same time, that task means organizations like his are “slipping a little bit into the insurance world,” he noted.

Paul Durr

While Pioneer Medical Group’s model involves employed physicians, another way to approach capitation is through an independent practice association (IPA)--such as Sharp Community Medical Group. About 800 independent physicians in the San Diego area contract risk through the organization, CEO Paul Durr said during his presentation.

The size and geographic reach of the organization gives Sharp Community Medical Group a leg up when contracting with health plans, he said, but noted that a key to the IPA’s success was requiring doctors to belong exclusively to that group. Another key was developing a common electronic medical system--though he noted it wasn’t easy to get specialists on board.

Additional core elements of successful alternative payment models, according to Durr and Kirk, include:

  • The power of data. For an organization that operates on an alternative payment model, “it’s all about control of the data,” Kirk said, which means the group should handle its own claims and provider credentialing. Having more data can also help in payer negotiations, according to Durr. One year, Sharp Community Medical Group negotiated a 20 percent rate increase in a health plan contract by leveraging data to demonstrate how many patients with complex conditions it was treating who were “out of the norm.” 
  • Utilization management. “If you only do one thing well, that’s what you want to do well,” Kirk said. One of the ways Pioneer Medical Group accomplishes that is with its after-hours clinics, which divert patients to a lower-cost alternative to the emergency department. Similarly, his organization has learned that “patient engagement really is effective at driving change,” Durr said, noting that they key is to engage patients in their own care when they experience a health event.
  • Provider engagement. Sharp Community Medical Group has been around since the late 1980s, Durr said, and only in recent years has it “developed a relationship with our providers from being seen not as a payer, but being seen as a partner.” It wasn’t until it required exclusivity from its providers, and then worked with them to design incentives, that it redefined its relationship with them.
  • Quality incentives. There are a wealth of resources available for alternative payment models to measure quality, Kirk noted, such as the government’s star ratings, CAPG’s standards of excellent program and the Integrated Healthcare Association’s pay-for-performance program. Through IHA’s program, Kirk noted, Pioneer Medical Group has been awarded $3.15 million in bonus payments since 2005.

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