DETROIT -- General Motors and Henry Ford Health System signed a direct contract to provide a wide range of health care services for up to 24,000 salaried employees and their dependents in Southeast Michigan.
The direct contract with GM is the first of its kind in Michigan. Only about 3 percent of self-insured companies nationally have some form of direct contracts with providers, said the National Business Group on Health.
But a growing number of large self-insured employers -- Boeing, Walmart, Lowe's, Whole Foods, Disney and Intel -- have found that one sure way to reduce employee health care costs and improve service is to cut out middle-men health insurers and develop with integrated health care delivery systems that share cost savings and pay based on value.
Under the five-year contract for GM ConnectedCare, Henry Ford must hit an annual financial budget and will be held accountable for hitting key quality, cost and utilization of services metrics on a wide range of services, said Dr. Bruce Muma, interim president and CEO of Henry Ford Physician Network.
Metrics include targets for customer service, preventive care, such chronic conditions as heart disease and diabetes and ER visits, Muma said.
Though Henry Ford Health was established in 1915 by Henry Ford, founder of Ford Motor Co., the health system has no current connection with the rival automaker.
ConnectedCare with Henry Ford is available for GM salaried employees during open enrollment starting in October with coverage to begin Jan. 1. Eligible employees and dependents will be covered in Wayne, Macomb, Oakland, Washtenaw, Livingston, Lapeer and St. Clair counties. The plan is not being offered to union employees.
Blue Cross Blue Shield of Michigan will be the contract's third-party administrator, processing and paying for claims and services and auditing data for reconciliation of shared savings at the end of each year under the PPO contract, Henry Ford and GM said. A key difference is that GM and Henry Ford will use pricing they have agreed on, rather than Blue Cross network pricing.
If Henry Ford stays under total annual cost terms and hits 19 agreed-upon metrics, the six-hospital system will split the savings with GM. If those targets are not reached under the risk-based contract, Henry Ford could lose money.
Sheila Savageau, GM's U.S. health care leader for global compensation and benefits, said the auto company decided nearly four years ago it needed to create a new contracting paradigm that moves away from fee-for-service medicine and encourages quality and value-based care.
Working with Blue Cross on two other PPO contracts it offers its employees, GM had been able to hold down annual cost increases to between 2 percent and 4 percent. GM anticipates a 10 percent savings over the five-year life of the contract for the company and employees, she said.
Savageau said GM told Blue Cross it planned to offer a direct contract to one or more health systems in Southeast Michigan for 2019.
"Blue Cross has been a really good strategic partner. I told them three years ago to get on board with value-based contracting. They weren't there yet. They were more fee-for-service, so we decided to look for a direct contract with one of the health systems in Southeast Michigan," Savageau said.
Over the past three years, Blue Cross has moved aggressively to sign value-based contracts with large health systems. Blue Cross now contracts with about 80 percent of hospitals in Michigan under value-based arrangements, Helen Stojic, director of corporate affairs with Blue Cross.
Stojic said Blue Cross' administrative services organization arrangement with GM and Henry Ford is the insurer's first direct contract between an employer and provider.
"We support innovation in health care," Stojic said. "When they brought it to us, we were willing to do that. It is a different design. It will be interesting to see how it develops."
Muma said Henry Ford responded to a GM request for proposal in the spring of 2017. "They had a pretty broad net to find a partner," he said. "We have had a really productive relationship talking with GM for more than a year. We want to try new things and be innovative."
GM issued an RFP to all health systems based in Southeast Michigan, Savageau said. Three finalists were chosen, including Beaumont Health and Ascension Michigan, according to a source knowledgeable about the process who asked for anonymity. Henry Ford won out.
Savageau said it is possible GM will add other health systems in direct contracts in future years to give employees more options. Beaumont declined comment and Ascension did not respond on deadline.
"We are still talking with the other two systems. We were very transparent on the criteria they need to meet," Savageau said. "Henry Ford has been doing value-based payment models for seven years. We first thought we might do two direct contracts. But now we might do more."
Why GM wants direct contract
Advantages for GM with direct contracts include giving the company more control over health benefit design and the potential to lower costs of care. Providers also have more flexibility to order the tests or deliver specialty care they believe is necessary for a patient's treatment without having to negotiate through insurance company red tape, also called prior authorization.
Lower costs for GM also are a major advantage, said Savageau, but a lot depends on Henry Ford hitting the value-based targets and employees following physician advice and staying within the narrow network, she said.
"We have a cost-share philosophy, so any savings we have will be shared with employees," Savageau said. Under the health benefit structure, GM pays for about two-thirds of costs with employees paying for one-third, she said.
ConnectedCare will be the third plan option for salaried GM employees. The other two options are also high-deductible health plans with health savings account plans based on a PPO network.
"This (Henry Ford) option is the same plan design as the other two (Blue Cross options). The key difference is the monthly contribution they pay. It is the lowest-cost option," Savageau said.
Stojic said GM's other two plans are Blue Cross products and also have value-based components that seek to improve quality and lower costs.
"We have been making a lot of progress with value-based contracts," she said. "It is a learning process with the hospitals. It changes the dynamic with partners moving from fee-for-service to more value-based measurements."
Savageau declined to state the monthly premiums to employees for the three plans, but said ConnectedCare would be $300 per year less expensive for employees than GM's basic plan with Blue Cross and $620 less than the more expensive standard plan with the Blues. For family enrollees, ConnectedCare will be $860 less than the basic plan and $1,980 less than the standard plan, based on higher deductibles, copayments and co-insurance.
There are other incentives for employees to choose the Henry Ford plan and stay within its network.
Under ConnectedCare, the deductible for a single GM employee will be $1,500 with a 10 percent co-insurance for in-network, or "tier one" coverage with Henry Ford and other designated providers. Going out of network in "tier two" coverage would increase the co-insurance to 30 percent, a much higher cost than GM's other two plans.
Overall, GM employees will have their choice of more than 3,000 providers in the ConnectedCare network, including Henry Ford employed and affiliated doctors and other providers who are needed to round out specialty services. Those services under the plan will include primary care, hospital, emergency care, behavioral health and pharmacy.
GM and Henry Ford project 20 percent to 25 percent of GM's 24,000 eligible employees and dependents will sign up for the Henry Ford program the first year. Muma said he believes 50 percent will be covered over time.
"GM has limited the first year to selective ZIP codes in the seven-county (Southeast Michigan) area," Muma said. "That does not include Henry Ford Allegiance (in Jackson) now, but is where they want to start. We imagine over five years, the product could grow in scope."