New Jersey's Horizon Alliance Breaks New Ground in Payment Reform

As CMS pushes healthcare systems to move away from fee-for-service, the state's largest insurer makes a major move toward value-based payment.

As CMS pushes healthcare systems to abandon the fee-for-service approach to paying for medical care, New Jersey’s largest insurer is making a major foray into value-based payment starting today.

Horizon Blue Cross Blue Shield of New Jersey, has created an entity called OMNIA that consists of 6 hospitals and a large state physicians group, which is being billed as a partnership among the parties that will reward the providers based on keeping patients healthy.

The creation of OMNIA will allow Horizon to roll out new health plans with reduced out-of-pocket costs when open enrollment opens in most workplaces in New Jersey next month. The plans will also offer reduced premiums, which could give OMNIA a competitive edge in wooing customers and gaining market share.

Although “accountable care organization” (ACO) is not part of the OMNIA name, the entity appears to be based on the principles called for in the Affordable Care Act. Providers who organize as ACOs are paid by insurers or Medicare based on their ability to meet or exceed preset quality standards and achieve financial goals. They focus on ensuring that patients with chronic conditions like diabetes follow instructions with medication and get to specialists’ appointments for things like eye exams and foot care.

ACOs also have incentives to keep patients out of the hospital and from using the emergency room for routine care, and many have created arrangements for patients to get care after business hours or in non-traditional settings, such as an urgent care clinic or through telehealth.

While the latest report from CMS showed that the most experienced ACOs were seeing the best results for financial and quality performance, there has been criticism that urban teaching hospitals are at an unfair advantage. There is great debate whether it makes sense to punish urban hospitals by withholding reimbursements if their poor diabetes patients cannot meet glycated hemoglobin targets, for example.

The hospitals in Horizon’s new alliance are mostly suburban hospitals in some of the state’s wealthiest areas, but the list includes Robert Wood Johnson University Medical Center in New Brunswick. NJ Spotlight, a leading news outlet that covers healthcare in the state, noted that the lineup leaves out Cooper University Health Care in Camden, which is home to the state’s newer medical school. The news outlet said it was not yet clear how being excluded will affect a hospital’s revenue, since it may simply mean that patients can still gain access to their hospital of choice, but through a different price tier.

Horizon officials told NJ Spotlight that it expects the new arrangement to offer several advantages to both providers and to consumers:

· Partners in the arrangement will meet regularly to discuss ways to improve care and hold down costs.

· Providers will have more autonomy in choosing treatments.

· The arrangement will promote greater sharing of claims information.

· Patients could save thousands of dollars on deductibles, which many must pay before insurance coverage pays for care.

It remains to be seen how providers and consumer groups will react to the plan. New Jersey has been slow relative to other states to limit access to providers and has a comparatively poor return on the quality it gets for its healthcare dollar. Horizon may be criticized for creating “narrow networks” or for making low-cost options available to consumers in comparatively wealthier areas.

But the approach drew some positive reviews. “It is a very big deal,” said Joel Cantor, director of the Rutgers Center for State Health Policy and a leading voice on healthcare policy in New Jersey. “I think it’s an impressive plan. It’s a sharp change in direction from where NJ healthcare had been.”