the Grace Report Provides Important Private Intelligence, Gathered Exclusively
for OBs & GYNs, Their Practice CEOs, and Key Administrators.

Headlines- November 7, 2005
THE GRACE REPORT

Headlines- November 7, 2005

Commentary and Opinion by Robert L. Michel:
Making Quality Outcomes Pay off Financially and Clinically

IT’S HARD TO MISS TWO OF THE MAJOR THEMES IN HEALTHCARE TODAY: improving patient safety and raising the quality of outcomes. In this issue, the GRACE REPORT would like to make the argument that ob-gyns can make more money—and enjoy lower malpractice insurance costs—by improving the quality of care they provide within their practice settings.

I point to the experience of MaternOhio. This is an ob-gyn super group of 64 physicians based in Dublin, Ohio. As you will read on the following pages, during the 1990s, these ob-gyns made a significant strategic decision. They collectively agreed that it would be good medicine if all their physicians followed clinical guidelines as closely as possible.

These ob-gyns were perceptive and ahead of the curve. They recognized
that quality of care was becoming an issue with employers and consumers. They also correctly concluded that, in coming years, the health outcomes of medical groups and individual physicians were likely to be measured and these measurements would be made available to payers, employers and consumers.

MaternOhio’s ob-gyns made this strategic decision in the midst of the
managed care chaos of the mid-1990s, as consumers began to reject the
closed-panel, gatekeeper model HMO in favor of HMOs with out-of-plan
options and PPOs. Even in the midst of declining reimbursement,
capitation, and full-risk utilization clauses, MaternOhio’s physicians
recognized the importance of boosting the quality of care provided by
their group, both collectively and by individual physicians.

The first pay-off to this strategy came in 1999. As you will learn,
MaternOhio approached the largest payer in Ohio with a proposal that
was unorthodox at that time: “We want to be paid additional reimbursement when we consistently deliver above-average outcomes for
our patients.” To the payer’s credit, it recognized the value proposition for
it and its beneficiaries. It collaborated with MaternOhio to customdevelop
a physician pay-for-performance program still in effect today. The second payoff came in 2003. Using the same quality measurement data of outcomes, MaternOhio was able to significantly control its malpractice
costs by forming a captive insurance company and obtaining reinsurance
on favorable terms. These are big pay-offs from the earlier decision to
pursue higher-quality outcomes within the practice.

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Ob-Gyn Super Group Scores Big With Doc Pay-For-Performance

MaternOhio, with 64 ob-gyns, approached state’s largest payer with P4P proposal

CEO Summary: There’s lots of uncertainty surrounding the topic of physician pay-for-performance (P4P) programs. But in Ohio, the ob-gyns of MaternOhio are demonstrating that health insurers will recognize higher
quality outcomes and reward physicians with additional reimbursement.
Now in its fourth year, the physician P4P program involving MaternOhio
and Anthem Blue Cross Blue Shield of Ohio provides a powerful example of how physicians and payers can collaborate to deliver higher outcomes to patients while rewarding those physicians with additional reimbursement.

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Multiple Benefits from P4P Help MaternOhio’s 64 Ob-Gyns

Proactive business strategy initiated in 1999 helps Ohio ob-gyn group in multiple ways

CEO Summary: It’s a lesson in how “doing the right thing”can position an obgyn group for sustained success. Having decided, in the 1990s, to more closely follow clinical guidelines throughout the practice, and by all ob-gyns, MaternOhio was able to persuade the state’s largest health insurer to reward its higher-thanaverage health outcomes with increased ob-gyn reimbursement. A further benefit came when, using the same detailed outcomes data, MaternOhio controlled its malpractice costs by creating its own captive insurance company.

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OB-GYN Informatics Update: New Features In OB Systems
Support Clinical Guidelines

Goal is to get 100% of ob-gyns to follow clinical practice guidelines with all patients

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Aetna Posts Doc Rates On Web To Help Guide Consumer Choice

Goal is to give Aetna beneficiaries access to prices charged by physicians

CEO Summary: For the first time in recent memory, a national health insurer is publicly disclosing the contract prices it has negotiated with individual physicians. The pilot project allows Aetna beneficiaries in Greater Cincinnati to use Aetna’s Web site to access the prices charged by 5,000 primary care and specialist physicians for 600 common clinical procedures. Aetna is taking this bold step because it recognizes the fast growth of consumer-directed health plans. For such plans to work, consumers must have access to physician prices and a way to evaluate the quality of services provided by individual physicians.

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Urban, Rural Hospitals Prepare To Close Obstetrics Depts.

In October, a number of hospitals announce that they will cease maternity & OB services

CEO Summary: Last month, hospitals in big cities like Philadelphia and
rural communities like Hardeeville, South Carolina made public their decisions to close obstetrical departments. The obvious reason is that these hospitals were losing money on obstetrical services. However, a closer look hints that changes in birth rates, consumer choices of where to deliver their babies, and the steady increase in malpractice risks are the direct market forces now eating away at the financial viability of hospital obstetrics programs.

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Cervical Cancer Update: New Cervical Cancer Vaccines Create Ob-Gyn Opportunities

HPV vaccines by Merck and GlaxoSmithKline expected to be approved during next 18 months

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INTELLIGENCE: Late and Latent

PHYSICIANS INCREASE USE OF PDAS FOR E-PRESCRIBING

ADD TO: Medicaid Waiver in Florida

Look for the next briefing on Monday, November 28, 2005.

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