Harrington Looks To Shake Up Health Plan | Local hospital explores partnering with businesses to control costs
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MEDICAL INNOVATIONS: Edward H. Moore, CEO of Southbridge-based Harrington Healthcare, is looking for local businesses to participate in a new model of health care delivery.
When it comes to saving money, cutting out the middleman is a time-honored tradition.
And that’s exactly what officials at Southbridge-based Harrington Healthcare System are trying to do when it comes to ever-increasing health insurance costs.
Specifically, Harrington officials hope to craft their own health care plan outside of the traditional providers like Blue Cross Blue Shield and Fallon Community Health Plan. The goal is to greatly reduce the role of the insurance company in plan design and determining price.
The Details
The plan is in its early stages, but here is how it would work, according to Edward H. Moore, CEO of Harrington Healthcare: Harrington is seeking to ink agreements with enough area companies to get 10,000 employees enrolled as patients in the plan, which would serve to spread out the risk. Those employees and their employer would pay a set fee to Harrington for each member.
The hospital would have financial incentives built into the contracts to keep patients healthier. In short, it would set up a reward system for the hospital for keeping patients out of doctor’s offices and costs down.
The plan would be self-insured, meaning that the companies and the hospital — rather than an insurance company — would assume the risks. An insurance company would play an administrative role, Moore said.
“We’re seeking to improve access, quality, and health status, which in turn should keep the cost of care at a lower rate of increase,” Moore said.
Early Efforts
So far, Harrington officials have been in talks with more than 30 companies in the greater Southbridge area. Moore said that there is no guarantee the plan will hit its 10,000-person requirement, but he said that Harrington will know in approximately a year whether it can move forward.
Harrington’s creativity is a direct reaction to pressure that’s on all hospitals. In Harrington’s case, it recently made a list of expensive hospitals in a new health plan unveiled by Blue Cross Blue Shield, the largest insurer in the state. Many insurance companies have also blamed hospital costs for the rising cost of insurance, which has put hospitals on the defensive.
Meredith Rosenthal, a professor at Harvard University School of Public Health, said that risk-based plans like the one Harrington is exploring — known as capitated plans in the industry — started to become popular in the 1990s. But she said that the concept never truly took off.
“It’s cut out the intermediary, basically,” Rosenthal said. “There was even some sense at that time that health insurance companies might go away.”
Of course, that didn’t happen, and Rosenthal doesn’t think that will happen this time either. But she said that depending on the structure of the plan and who is creating it, it could produce savings.
Federal, State Proposals
Harrington’s plan is based on the principles of an accountable care organization (ACO), which is a central premise to the 2010 federal health care reform and also to a recent bill filed by Gov. Deval Patrick aimed at cutting health care costs in the state.
An ACO is an organization of doctors or hospitals that pool their resources with the goal of improving care and cutting costs. The result, advocates say, is lower health care costs for patients.
President Barack Obama wants to enroll as many as 4 million Medicare patients in an ACO by 2014 to reduce the costs of that program.
The ACO model contrasts with the current fee-for-service model of health care, which has been criticized by some for driving up prices by incentivizing sometimes unnecessary and costly tests and procedures. The way most health care plans are structured today, doctors and hospitals receive payment by procedure. That model, some argue, incentives doctors to order more tests and focus less on the overall health of the patient.
There is still much uncertainty among Massachusetts hospital administrators about how ACOs would be structured and how well they would work, said Francis M. Saba, who is CEO of Milford Regional Medical Center and sits on the board of directors of the Massachusetts Hospital Association.
But Saba said hospitals are glad to have systems like Harrington leading the way with pilot programs “to see where the bugs might be in the structure.”
Saba said that his hospital is shoring up its internal procedures to prepare for the potential of joining an ACO in the future.
A big piece of the uncertainty for hospitals is that the goals of ACOs is to reduce patient admissions by increasing collaboration and coordination among caregivers. Hospitals would be trading potentially lower revenues for savings down the road.
Saba acknowledged that hospitals are concerned but said that providers need to keep their focus on patients.
“You can’t lose sight of the business, but I think in the end, if all the players that are involved are really working on patient-centered care and high quality care, that it’s the right focus,” he said.
For Harrington, that loss could be mitigated by an influx of new ACO patients for its two hospitals, Moore said.
Another piece of the puzzle is how patients enrolled in a small ACO would be able to get care outside of the two hospitals that comprise it.
Moore said Harrington hopes to partner with UMass Memorial Healthcare and other providers to expand the facilities where patients could receive care.
Alexandra McNitt, director of the Central Mass South Chamber of Commerce, said that she and some of her members have met with Harrington officials to discuss the plan.
McNitt said that employers are certainly willing to listen to an idea that could reduce their health care costs, which routinely outpace inflation by three-fold or greater.
“The single biggest issue I’m hearing from my members is the cost of health care,” McNitt said. “It seriously impedes their ability to hire new staff.”
Moore said he thinks that Harrington is uniquely positioned in its market to make the plan work, in part because it is the largest health care provider in its area, with hospitals in Southbridge and Webster and few immediate competitors.
“We think this concept works for us better than some other areas due to our geography, primary care base, due to the fact that our employers are local and a lot of employees live locally,” he said. “I couldn’t see this working as well in Eastern Mass.”
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