Is Grand Junction Really a Model for the Future of Health Care?

President Barack Obama at a campaign stop in Grand Junction, Colo., on August 8, 2012.
National Journal
Sophie Quinton
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Sophie Quinton
Aug. 28, 2013, 6:29 a.m.

When Pres­id­ent Obama was mak­ing his pitch for health care re­form in 2009, he flew to Grand Junc­tion, Colo., to praise the loc­al med­ic­al com­munity for cut­ting health care costs. “You’re get­ting bet­ter res­ults while wast­ing less money,” he said. The area par­tic­u­larly ex­celled at provid­ing cost-ef­fect­ive care to Medi­care pa­tients — in 2006, Grand Junc­tion’s per-pa­tient Medi­care costs were 30 per­cent be­low the na­tion­al av­er­age. It wouldn’t be sur­pris­ing if the Af­ford­able Care Act that Obama even­tu­ally signed in 2010, with its em­phas­is on lower­ing Medi­care ex­penses, led more com­munit­ies to fol­low the ex­ample of this largely blue-col­lar city of around 50,000 on Col­or­ado’s west­ern slope.

But Grand Junc­tion’s health care story is more com­plic­ated than Obama’s praise in­dic­ated. While Grand Junc­tion has man­aged to provide low-cost care for Medi­care re­cip­i­ents, it’s not dra­mat­ic­ally less ex­pens­ive than oth­er Col­or­ado towns for non-Medi­care pa­tients. And therein lies the cau­tion for loc­al­it­ies that want to cre­ate low-cost med­ic­al havens: In­nov­a­tion that lowers health care costs for one type of pa­tient can some­times push costs up for an­oth­er. 

A his­tory of col­lab­or­a­tion has helped Grand Junc­tion rein in its Medi­care costs. The town sits hun­dreds of miles from ma­jor med­ic­al cen­ters in Den­ver and Salt Lake City, and its isol­a­tion has forced mem­bers of the med­ic­al com­munity to work to­geth­er. Back in the 1970s, area phys­i­cians formed an HMO — now known as Rocky Moun­tain Health Plans and avail­able across the state — as well as the Mesa County Phys­i­cians In­de­pend­ent Prac­tice As­so­ci­ation, a group of primary-care doc­tors and some spe­cial­ists. To­geth­er, the two or­gan­iz­a­tions de­veloped what RMHP calls the “Mesa County mod­el.” 

Un­der this blen­ded-pay­ment mod­el, MCPIPA doc­tors get the same re­im­burse­ment no mat­ter wheth­er the RMHP pa­tient they see is covered by Medi­care or private in­sur­ance. This makes it easi­er for pa­tients with dif­fer­ent kinds of in­sur­ance to find a doc­tor. Doc­tors used to get the same re­im­burse­ment for RMHP pa­tients covered by Medi­caid, too, but in 2008 re­im­burse­ments for Medi­caid pa­tients were lowered.

“We want our com­munity to go to their primary-care phys­i­cian,” says MCPIPA Ex­ec­ut­ive Dir­ect­or Sandy Ran­dall. En­sur­ing ac­cess to a fam­ily doc­tor gives pa­tients a lower-cost place to take their health prob­lems than the emer­gency room. Es­tab­lish­ing a re­la­tion­ship with a phys­i­cian also helps pa­tients man­age chron­ic con­di­tions, such as dia­betes, and get pre­vent­at­ive care.

MCPIPA and RMHP also use in­cent­ives to en­cour­age doc­tors to use less-ex­pens­ive ser­vices. RMHP with­holds a per­cent­age of re­im­burse­ments for the claims doc­tors sub­mit un­til the end of the year, when the health plan looks at its fin­ances. If premi­um rev­en­ues for Mesa County ex­ceed ex­pendit­ures on care, the health plan and MCPIPA share the profits. To set low-spend­ing norms in the med­ic­al com­munity, MCPIPA cre­ates cost pro­files for each primary care-doc­tor — with in­form­a­tion such as spend­ing on ima­ging ser­vices — and shares the pro­files among mem­bers.

There are lim­its to the reach of the Mesa County mod­el. RMHP in­sures about 25 per­cent of Mesa County pa­tients, and Mesa is home to less than half the 305,000 people in the Grand Junc­tion hos­pit­al re­fer­ral re­gion. But oth­er loc­al play­ers are also work­ing to make ser­vices more cost-ef­fect­ive. St Mary’s, the re­gion­al hos­pit­al, op­er­ates a clin­ic that gives un­in­sured and low-in­come pa­tients a low-cost al­tern­at­ive to the emer­gency de­part­ment for their non-emer­gency con­di­tions. The area hos­pice works with doc­tors to help eld­erly pa­tients make end-of-life plans, pre­vent­ing ag­gress­ive in­ter­ven­tions pa­tients don’t want.

For Medi­care, Grand Junc­tion’s ef­forts have paid off. In 2010, total Medi­care re­im­burse­ments per per­son in the hos­pit­al re­fer­ral re­gion were $6,993, 73 per­cent of the U.S. av­er­age and in the top 10 per­cent of low-cost re­gions, ac­cord­ing to the Dart­mouth At­las of Health Care. Few­er Medi­care pa­tients are re­ad­mit­ted to the hos­pit­al with­in 30 days. In the last two years of life, Medi­care pa­tients in Grand Junc­tion pay about 56 per­cent the U.S. av­er­age in co-pay­ments.

Oth­er pay­ers haven’t ex­per­i­enced com­par­able sav­ings. “We’re good for Medi­care; our oth­er costs maybe not so much,” Ran­dall says, des­pite doc­tors’ best ef­forts to lower costs for all pay­ers. It’s more chal­len­ging to con­trol costs for non-Medi­care pay­ers, she says. Medi­caid and com­mer­cial-claims data com­piled by Col­or­ado’s Cen­ter for Im­prov­ing Value in Health Care show that the total cost of care in Mesa County is ex­actly as ex­pec­ted, giv­en the pop­u­la­tion’s health status. Yet Mesa County res­id­ents are 16 per­cent less likely to be ad­mit­ted to the hos­pit­al, 26 per­cent less likely to make an out­pa­tient vis­it, and 33 per­cent less likely to vis­it the ER than their health status would pre­dict. Even though Medi­caid and privately in­sured res­id­ents use few­er ser­vices, their costs are on tar­get, not lower.

Why haven’t non-Medi­care costs dropped as dra­mat­ic­ally? “Al­most all the vari­ation in Medi­care spend­ing is driv­en by dif­fer­ences in util­iz­a­tion,” says Ateev Mehro­tra, a policy ana­lyst for Rand. Medi­care re­im­burse­ment rates are set na­tion­ally by the fed­er­al gov­ern­ment. But when it comes to private in­sur­ance, “the ma­jor­ity of the dif­fer­ence in spend­ing is not driv­en by util­iz­a­tion, but is driv­en by prices,” he says. In the com­mer­cial mar­ket, rates are set through loc­al ne­go­ti­ations between in­surers and hos­pit­al sys­tems.

In the Amer­ic­an med­ic­al sys­tem, there’s really no such thing as a low-cost re­gion. There are high-spend­ing hos­pit­als in low-spend­ing re­gions, and low-spend­ing hos­pit­als in high-spend­ing re­gions, the In­sti­tute of Medi­cine poin­ted out in a re­port last month. In fact, low Medi­care spend­ing is of­ten as­so­ci­ated with high private-in­sur­ance spend­ing, says Robert Ber­en­son, fel­low at the Urb­an In­sti­tute. Small med­ic­al com­munit­ies tend to have lower Medi­care costs be­cause there are just few­er re­sources for Medi­care pa­tients to use. But a hos­pit­al dom­in­ant over a med­ic­al com­munity has mar­ket power it can use to de­mand high­er prices from com­mer­cial in­surers.

In re­cent years, the rising cost of care has been driv­en by unit prices, not be­cause of ex­cess­ive use. Even the old rule of thumb — that it’s cheap­er to see pa­tients out­side the hos­pit­al — is erod­ing as prices for out­pa­tient ser­vices rise and more ser­vices are de­livered in an out­pa­tient set­ting. From 1999-2011, hos­pit­al out­pa­tient spend­ing per fee-for-ser­vice Medi­care be­ne­fi­ciary grew 110.5 per­cent, ac­cord­ing to the Medi­care Pay­ment Ad­vis­ory Com­mis­sion.

Grand Junc­tion demon­strates how care co­ordin­a­tion and pay­ment in­cent­ives can lower the cost of care for Medi­care pa­tients without sac­ri­fi­cing qual­ity. Lower­ing costs for every­one will take an­oth­er step: tack­ling the prices of ser­vices. That’s been hard to do, his­tor­ic­ally, be­cause of the lack of price trans­par­ency in the sys­tem. But a host of re­cent ef­forts — such as the CIVHC’s claims data­base, fed­er­al data re­veal­ing the prices giv­en hos­pit­als charge for com­mon pro­ced­ures, and na­tion­al data-gath­er­ing ini­ti­at­ives such as the Health Cost In­sti­tute — could help shed light on what’s driv­ing health care costs for non-Medi­care pay­ers. Most doc­tors don’t know off the top of their head what a giv­en pro­ced­ure at a giv­en fa­cil­ity will cost a pa­tient, Ran­dall says. Pub­lic data would make it pos­sible for them to find out.

Cla­ri­fic­a­tion: An earli­er ver­sion of this art­icle in­cluded an out­dated ac­count of the blen­ded pay­ments agree­ment between MCPIPA and RMHP. Since 2008, re­im­burse­ments for Medi­caid pa­tients have been lower than for Medi­care and privately in­sured pa­tients.

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