Blue Cross & Blue Shield of Rhode Island and South County Hospital Sign Innovative Contract Designed to Improve Quality, Moderate Costs

(Providence, RI, 5.3.2011)

As a part of its ongoing efforts to moderate healthcare costs and improve quality of care and member experience, Blue Cross & Blue Shield of Rhode Island (BCBSRI) today announced that they have successfully negotiated a contract with South County Hospital. The contract features global payment terms which are designed to improve healthcare quality and efficiency, while also moderating costs.

"Hospital reimbursements rose 24.2 percentage points more than inflation from 2007 through 2010, making them the number one driver of healthcare costs today," said Dr. Gus Manocchia, vice president and chief medical officer at BCBSRI. "In an effort to help moderate these costs and improve the affordability of care for our members, South County Hospital has moved away from the traditional fee-for-service compensation model, which incents volume, to an innovative global payment model, which encourages high quality care, efficiency and care coordination across the local system."

According to Manocchia, under the terms of the contract, South County Hospital will be provided with a single global payment for providing healthcare services to BCBSRI members, instead of a payment for every service provided. If South County Hospital is successful in its efforts to improve community wellness and member health outcomes, their profit will be greater. If not, their profit will be less.

"There are a lot of safe and effective ways for hospitals to improve efficiency and participate in moderating healthcare costs without reducing quality or treatment options," said Manocchia. "Simple changes like making sure that a patient fully understands their diagnosis, medication regimen, and treatment plan upon release from the hospital improve that patient's chances of a successful recovery and reduce the likelihood of inconvenient and expensive readmissions. Global payments help improve quality of care by creating a critical link between compensation and patient outcomes, which will ultimately help make healthcare more affordable for everyone.

According to Lou Giancola, President and Chief Executive Officer of South County Hospital, "We are pleased to work with BCBSRI to support the Hospital's efforts to promote community wellness. We strongly believe that our mission is not only to treat people when they are ill, but to promote those processes and programs that can keep people well. Changing the way the Hospital is paid allows us to continue that work without compromising our financial well-being. While there are certainly many challenges ahead, we believe the goals of South County Hospital and BCBSRI are aligned."

This agreement also is consistent with the OHIC payment reform terms that were set in July 2010. Those conditions include efficiency-based units of payment for services, an annual maximum payment increase for services based on Medicare's calculation, quality incentives based on national standards, and administrative efficiency standards.

In order to track progress, the two parties will meet on a quarterly basis to discuss operational, financially and quality performance. Manocchia stated, "It is critical that we monitor both parties performance under this new agreement to ensure a successful partnership. If we have better outcomes, our members will benefit from improved quality of care."

Manocchia continued, "BCBSRI is committed to taking steps that improve local healthcare delivery and costs and keep future hospital reimbursement increases in line with the consumer price index. This agreement with South County Hospital is another step forward in our efforts toward healthcare reform in our state and we are happy that South County Hospital is partnering with us."

Blue Cross & Blue Shield of Rhode Island is the state's leading health insurer and covers more than 600,000 members. The company is an independent licensee of the Blue Cross and Blue Shield Association. For more information, visit www.bcbsri.comand follow us on Twitter @BCBSRI.

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