Blue Cross Blue Shield of Michigan and Munson Healthcare embrace new approach to reimbursement with milestone contract

Agreement focuses on health system and physician collaboration to improve patient care; Munson Healthcare and Blues realize savings under value-based reimbursement model

Nov 12, 2013, 11:00 ET from Blue Cross Blue Shield of Michigan

TRAVERSE CITY, Mich., Nov. 12, 2013 /PRNewswire/ -- Munson Healthcare and Blue Cross Blue Shield of Michigan are launching a new value-based hospital reimbursement agreement in northern Michigan designed to improve patient care and medical outcomes while also enhancing efficiency and holding down the cost of care.

"Blue Cross and leading hospitals such as those affiliated with Munson Healthcare are moving away from a focus on volume-based reimbursement toward models that have an increasing emphasis on the quality and efficiency of care at the forefront," said Daniel J. Loepp, president and CEO of BCBSM. "Our partnership with these Munson Healthcare hospitals focuses reimbursement on the success achieved by doctors and hospitals in improving quality and patient outcomes while also achieving cost efficiency. Munson Healthcare has long been an industry leader in the region, and we look forward to working with them on this new value based reimbursement arrangement."

Munson Healthcare President and CEO Ed Ness said the agreement represents a positive step for patients and Munson Healthcare hospitals.

"We are pleased to join with Blue Cross Blue Shield in helping make health care reform real for our patients. As the largest health system north of Grand Rapids, we are taking a leadership role in keeping and growing strong local healthcare services for northern Michigan," Ness said. "Health care reform is shifting our model of care from one based on volume, to one that focuses on value. Ultimately, this agreement will benefit our patients by improving the coordination of care and reducing cost. That's the right thing to do."

The new reimbursement arrangement is being launched at Munson Medical Center in Traverse City, Kalkaska Memorial Health Center in Kalkaska, and Paul Oliver Memorial Hospital in Frankfort. The arrangement covers a three-year period and supports closer collaboration between the hospitals and their physician partners to improve the health of the populations they serve. To accomplish this, BCBSM will provide the health system with funding for infrastructure improvements needed to better coordinate care between the hospitals and physicians.

Since last year all three hospitals have been working with their provider partners in the community to develop and implement an infrastructure plan that includes an all-patient registry system. The system would enable caregivers in the hospital and in doctor's offices to have easier access to patients' records so that information can be combined from multiple sources to promote coordination of care, improve care quality, and help ensure the right care is given at the right time in the right setting.

Their agreement provides a fair base-rate increase in reimbursement from BCBSM to the hospital. In addition Blue Cross will reward the hospitals with a share of the savings achieved when hospitals and physicians coordinate the delivery of efficient and effective care, eliminate reuse and over use of care, and prevent re-hospitalizations.

"Munson Healthcare hospitals have long been a leader in delivering high quality care at a low cost," said Mark Hepler, Munson Healthcare chief financial officer. "This agreement will recognize and reward the collaborative efforts between our hospitals, physicians, and providers to ensure our care is efficient, effective, and seamless as we work for positive outcomes for patients."

"When a patient visits the hospital or doctor, imagine how much more manageable and valuable that situation would have been if communications between the doctor, the hospital, the pharmacist, and the outpatient setting were seamless and connected," said Susan Barkell, BCBSM senior vice president for Health Care Value. "Our new contracts with these Munson Healthcare hospitals will work toward achieving this connectivity through infrastructure incentives."

On the federal level, evolving from the traditional fee-for-service payment approach toward more emphasis on value-based hospital contracting has already shown success.

"Under national health care reform, the federal government is moving toward a value-based reimbursement model by paying more to hospitals that show a lower rate of preventable readmissions among Medicare patients – and they've already seen results," said Jeff Connolly, BCBSM president for West Michigan operations. "Fee-for-service reimbursement has been a significant factor in the huge growth of health care costs and it's time to begin to shift from what isn't working. We look forward to working with Munson Healthcare to advance this effort."

Each hospital and its physicians have established milestones to ensure infrastructure work continues along with funding through 2015.

"All over the country, hospitals are redesigning themselves to adapt to changes brought on by health care reform. While the current environment provides challenges, we also believe it creates opportunities like this for very positive change," Ness said. "I think our patients will agree that we are taking a step to become more accountable for their positive outcomes."

About Blue Cross Blue Shield of Michigan
Blue Cross Blue Shield of Michigan, a nonprofit organization, provides and administers health benefits to more than 4.4 million members residing in Michigan in addition to members of Michigan-headquartered groups who reside outside the state. The company offers a broad variety of plans including PPOs; Blue Care Network HMO; Health Savings Accounts; Medicare Advantage; and Part D Prescription Drug plans. BCBSM also offers dental, vision and hearing plans. Throughout our history, we've adapted and transformed ourselves to grow and lead in an increasingly complex industry. Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. For more company information, visit

About Munson Healthcare
Munson Healthcare is a nonprofit network of hospitals and related organizations delivering a broad array of health care services to the residents of 24 counties in Michigan's northern Lower Peninsula and eastern Upper Peninsula. We are eight community hospitals committed to the well-being of each patient and to delivering high quality, safe, affordable health care. We are eight supporting organizations contributing to regional health care through coordinated services that result in quality, convenient, easy to use care for patients and their families.

Munson Healthcare owns Munson Home Health, Munson Medical Center, Munson Mobile Imaging, the Munson Dialysis Center, North Flight EMS, and Paul Oliver Memorial Hospital in Frankfort. Munson Healthcare has joint ownership of Great Lakes Mobile PET, Northern Michigan Supply Alliance, and the Northwest Michigan Surgery Center. Munson Healthcare manages Kalkaska Memorial Health Center, Mercy Hospital Cadillac, and Mercy Hospital Grayling; and has affiliation agreements with Charlevoix Area Hospital, Otsego Memorial Hospital in Gaylord, and West Shore Medical Center in Manistee.

For more information, please visit

SOURCE Blue Cross Blue Shield of Michigan