Salem Health pulled it off at the last minute, finalizing a contract with a long-standing insurance company -- United Healthcare -- that was set to expire next Wednesday. Terms of the new contract were not disclosed, but the decision came down to dollars and cents.
In making the announcement to hospital staff, board members acknowledged that “renegotiating contracts with today’s commercial payers is not simple. Commercial contracts are complex, and there is significant financial impact from these contracts on local hospitals and providers. The process we went through with United Healthcare was not unusual. Negotiations typically require a long lead time and are resolved at the last minute.”
There will be no disruption in coverage for patients, according to the announcement, and Salem Hospital, West Valley Hospital and Willamette Health Partners will continue as in-network providers under the new contract. Earlier, Salem Health notified its patients to expect higher copayments when seeking care.
At the same time, Salem Health indicated that a similar termination notice had been sent to Regence BlueCross BlueShield after negotiations reached a standstill. It’s unknown whether hospital officials have been able to reach agreement with that insurer.
Higher Costs in Salem
An independent analysis that relied on a recent Health Affairs paper indicates that healthcare costs in Salem are among the highest in the nation. In that paper, Brandan Saloner and his colleagues conducted an experiment where a group of actors pretended to be uninsured and made phone calls, asking for the cost of a primary care appointment. They conducted their research in 10 states – Arkansas, Georgia, Iowa, Illinois, Massachusetts, Montana, New Jersey, Pennsylvania, Oregon and Texas. Brad Wright, PhD, a professor in the department of health management and policy at the University of Iowa, extrapolated that data, coming up with the ten highest cost cities – arranged by state capitals. His research focuses on safety net and primary care providers, health reform and patient participation in healthcare, and his research has been published in Health Affairs and the American Journal of Public Health, among others.
“It's widely known that it costs a lot more to live in some parts of the country than others,” according to Wright’s blog post. “Off the top of your head, you can probably name New York, San Francisco,
and Washington, D.C. as examples of cities where it is extremely expensive to live. Of course, that's just the tip of the iceberg. It's not like Boston, Chicago, or Los Angeles are particularly cheap. Generally speaking, big cities are more expensive. A large part of that is likely supply and demand.”
What surprised Wright, however, were the high medical costs in Salem and Des Moines. “While Salem is expected to be the second-most expensive, it is actually the most expensive by far -- a whopping 30 percent more costly than the next most expensive locale, Boston,” he wrote. “And, at the other end of the spectrum, Des Moines is expected to be the cheapest of all, but it is actually the fourth most expensive on the list.”
Wright reiterated that the actual numbers only represented a sample within each state, and variation is possible. In conducting his analysis, he used the data from the Health Affairs article, comparing it with a cost-of-living calculator that helped him look at healthcare costs, and rank the state capitals in order from most expensive to least expensive, with 100 as the national average. Salem ranked second to the top:
1. Boston, MA 126.6
2. Salem, OR 117.7
3. Helena, MT 103.6
4. Atlanta, GA 102.6
5. Springfield, IL 101.8
6. Trenton, NJ 101.8
7. Austin, TX 100.6
8. Harrisburg, PA 91.5
9. Little Rock, AR 87.1
10. Des Moines, IA 84.7
Doing further analysis, he calculated the expected cost for each city, comparing it to the actual cost identified by the researchers in the Health Affairs article and came up with the following;
1. Boston, MA Expected: $156 Actual: $150
2. Salem, OR Expected: $145 Actual: $195
3. Helena, MT Expected: $127 Actual: $150
4. Atlanta, GA Expected: $126 Actual: $126
5. Springfield, IL Expected: $125 Actual: $125
6. Trenton, NJ Expected: $125 Actual: $125
7. Austin, TX Expected: $124 Actual: $125
8. Harrisburg, PA Expected: $113 Actual: $125
9. Little Rock, AR Expected: $107 Actual: $120
10. Des Moines, IA Expected: $104 Actual: $143
Salem Health and OHSU
Salem Health and OHSU have signed a letter of intent, creating a joint management company. Such a company offers both organizations the opportunity to play a commanding role in the coordination of care in both communities, Peter Rapp, executive director of OHSU and executive director of OHSU Healthcare, told The Lund Report earlier.
Under this new arrangement, Rapp anticipates that access to services in Salem will definitely expand. “Hopefully some of the patient traffic comes to Portland for care that’s not available in Salem, and we can keep care in Salem by working with the clinicians there. It means good things for the Salem community.”
During the due diligence process now underway, the boards of Salem Health and OHSU are expected to define their leadership roles, he said. “That process will dig a little deeper into understanding how each organization works and the final agreement will include that information to make sure it operates effectively. We’re getting to know each other at a more detailed level so everything is transparent to both partners.”
Salem Joins Forces with Moda
Moda Health has joined forces with hospitals from throughout the state to transform the delivery of healthcare and expand its reach
As one of the leading forces behind the Population Health Alliance – a partnership of seven hospital systems throughout Oregon – Moda has primed itself to take healthcare in a new direction, while, at the same, reducing cost and improving care. The Alliance becomes operational next January.
Crane, formerly the chief financial officer of Salem Health, has been tapped to lead the Alliance endeavor and has recruited Dr. Geoff Swanson who spent 15 years focused on healthcare leadership at St. Luke’s Regional Medical Center, as chief medical officer.A director of technology and analytics, Melissa Davies, is also on board.
Initially, Crane was loaned by Salem Health to get the project off the ground last year and began working out of Moda’s offices in downtown Portland. “I’m not planning to go back to Salem Health; I’m here for the long haul. I’m very excited and optimistic about doing this,” he told The Lund Report.
The Alliance isn’t unlike the goal of the Oregon Health Policy Board, to replicate the coordinated care model in the commercial marketplace. And, its primary tenets appear closely aligned – managing and coordinating care, shared responsibility by the providers and patients, measuring performance and paying for outcomes, price and quality transparency and sustainable costs. The statewide purchasing pools – the Oregon Educators Benefit Board and the Public Employees Benefit Board – are already moving in that direction.
The Alliance is comprised of seven hospital systems – Asante Health, Bay Area Hospital, Mid-Columbia Medical Center, Oregon Health & Science University, Salem Health, Sky Lakes
Medical Center and St Charles Medical Center. Together they have 52,000 employees and represent 3.5 million patient visits, including inpatient admissions, and outpatient and emergency room visits, all of which will become part of this new approach.
Physicians are at the core, and a 14-member quality and health management committee has been organized to help lead this effort, which held its kick-off meeting last December. Its members includes:
Once the Alliance goes live in January, these hospitals should see fewer people using their emergency rooms or being readmitted to the hospital, Crane added. Later, other hospital systems will be invited to join the Alliance, but not the independent medical clinics.
Moda’s Involvement
Moda became involved because its leadership was looking for strategies around population health and had an affinity to work with this group. Its spokesman, Jonathan Nicholas told The Lund Report that
Moda now has 13 companies under its umbrella and calls itself a “House of Brands” rather than a “Branded House.”
Calling the Alliance a platform, not a health plan, Nicholas said Moda became involved after learning that many of its partners were investigating a similar series of initiatives. “By harnessing our energies to a single wagon, we hope to accelerate the process of improving care,” he said. “Moda is always looking for new opportunities, either by founding or acquiring companies, to continue our commitment to drive down the cost of healthcare by transforming the way it is both provided and paid for throughout the communities we serve. Our demonstrated successes to date in Oregon, in Washington and in Alaska have made clear that people like the way we are making health simple. That’s why we made the decision this year to plant our flag in California. Any why California is going to be seeing a lot more of us in the years ahead.”
