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Children's Hospital Signs On To Global Payment Strategy

Sandra Fenwick, President and COO, Children's Hospital Boston
Sandra Fenwick, President and COO, Children's Hospital Boston

Children's Hospital Boston has a new three year deal with Blue Cross Blue Shield that holds rates flat this year.  In the second and third years, Blue Cross says the increases will be less than general inflation, which has been around 2%.

Children's President and COO Sandra Fenwick says the savings, as compared to previous increases, will be $83 million.  That amount, Fenwick says is in addition to money Children's shaved off contracts in 2009 and 2010 for a the total of $155 million.  Is that enough over five years? Weigh in below.

Beyond the savings, Fenwick says this contract is a milestone because it moves Children's into the Blue Cross Blue Shield global payment plan (the Alternative Quality Contract/AQC).  "We’re going to be taking risk for managing the care of our patients," says Fenwick, "we’re going to be held accountable for the quality, and it really is in line with policy changes that the whole country is going to be watching."

Blue Cross CEO Andrew Dreyfus also calls this contract a milestone, but for a different reason.  Dreyfus recalls sitting in meetings several years ago about moving to global payments and hearing "a lot of skepticism about whether global payments could work in a specialty hospital like Children’s. I think we’re answering the question that it can work in a way that both improves quality and lowers cost."

For more on how Fenwick sees the deal, here's a condensed version of our interview:

Fenwick: The savings in these contracts are in addition to an aggressive and comprehensive approach that we took at Children’s starting in 2009 to try and reduce both the cost of health care as well as to improve quality. I can give you some examples of that if that would be helpful.

We built some care delivery innovations like something called home ventilation for kids who are on ventilators, where we actually send a physician into the home to keep kids from coming to the emergency room or to the ICU.

We’ve moved some of our chemotherapy children to a home hydration program preventing inpatient stays for those kids. We have tried something called "Try Without Sedation," so that very small children can avoid anesthesia going through an MRI. All of these are ways of both trying to improve the quality and the experience of care while clearly reducing the cost of care for those incidents.

And we have been really working hard to move care to the lowest cost setting, trying to keep kids out of the hospital where we can through our asthma program and moving children from inpatient to outpatient to satellites and to our community hospitals. So all of those are both related to the unit price of care as well as to the comprehensive cost of where the care is delivered and how much is delivered and how much it costs.

Bebinger: Are you still a high cost hospital in the tiered insurance plans?

Fenwick: We are a high cost hospital. Pediatrics is more costly than adult care. And a specialty hospital that really takes care the sickest children will always be more costly than either a community hospital or a hospital that takes care of principally adults.

Bebinger: Why are you agreeing to these rate changes and moving into the Blue Cross AQC (the global payment contract).

Fenwick: First of all, we are absolutely committed to working on innovative ways to reduce both the cost of care as well as to be innovative around payment policy and business solutions that will sustainably reduce the cost of health care, at the same time improving quality. So that is a commitment that we have made over the last three to four years.

I think it was important for us to lead with quality, to make the program with Blue Cross one that really adapted better to pediatric care. And so we are the first pediatric only or specialty hospital to join this particular ACQ or alternative contract. And we worked with Blue Cross to make the ACQ work for kids by having more robust pediatric outcome measures that include not just local but national comparators and not just primary care metrics but also specialty and specialty hospital measures.

Bebinger: What would you say to a neighbor who is not immersed in health care about what kind of difference this will make for patients?

Fenwick: I think that it will basically allow for better coordination of care between primary care, specialists and the hospital. And I think that’s probably where having the information about care of children and the cost that’s involved in taking care of kids, will benefit both the quality of the delivery of service and the right amount of care. And I think all of these things will go toward improving both the cost and long term quality of care.

Bebinger: How different will it be for doctors to work under this arrangement?

Fenwick: I think the physicians will be working much more collaboratively, managing patients through what’s called the pediatric medical home, where the primary care doctor will be looking at managing all of the patient’s care locally, which is what they have been doing now for the last couple of years. But in addition to doing that, they will also have more information about where their children are getting care, how much it’s costing them, no matter where they get the care.

That data, I think, will help them make and inform their decisions about the whole cost of delivering care. Then pairing that with all of the incremental data around quality will make sure that, while they’re looking at cost, they are also balancing that against the quality metrics.

Too often health care reform ideas don’t account for pediatrics. This new pediatric focused AQC features a whole range of quality measures from well-child to sub-specialty care. We are going to be compared locally and against national pediatric comparators. We thought that was very important to make sure that the care that was being delivered was appropriate for kids.

The only other thing that I would say is that this demonstrates that we really are trying to not only be innovative leaders in care and research for children and that we are really focused on ensuring that all children have access to Children’s Hospital and its doctors, and will receive the world-class care that we’ve been a leader in pediatrics for over 140 years or so.

Bebinger: How significant is this for Children's?

Fenwick: I think it’s a pretty significant milestone. I think we are going to be taking risk for managing the care of our patients. We’re going to be held accountable for the quality simultaneously. And I think it really is in line with health care reform efforts and policy changes that I think the whole country is going to be watching.

This program aired on January 24, 2012. The audio for this program is not available.

Martha Bebinger Twitter Reporter
Martha Bebinger covers health care and other general assignments for WBUR.

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