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Patrick Springer, Published January 27 2011

Blue Cross Blue Shield of North Dakota, health providers join forces to rein in rising health care costs

North Dakota’s largest health insurance company and some leading health providers pledged today to work together to trim medical inflation.

The initiative seeks to reduce the annual rate of medical inflation, now averaging 8 percent, to 6 1/2 percent in three years.

“Now, that is not the end of the journey,” said Paul von Ebers, chief executive officer of Blue Cross Blue Shield of North Dakota, which is spearheading the collaborative effort. “This is an interim goal.”

The joint effort to rein in health costs involves Blue Cross Blue Shield of North Dakota and major health providers including Sanford Health and Essentia Health, as well as Altru Health of Grand Forks and Trinity Health of Minot.

Reducing the rate of health care inflation to the targeted 6 1/2 percent annual rate would save $30 million over the next three years and more than $15 million a year thereafter, von Ebers said.

A major component of the drive to restrain costs is for the insurer to work with doctors to better manage chronic conditions, such as diabetes and asthma, and complex “mega claims.”

The push in North Dakota, which seeks to get ahead of national health reforms, is because of wide agreement that the current rate of medical inflation is “unsustainable,” von Ebers and others said.

It also reflects the recognition that, for stubborn and complex medical conditions, new methods are needed to deliver care more effectively and affordably.

A major force behind spiraling health care costs: patients’ demand for services, resulting in health insurance claims.

Blue Cross Blue Shield of North Dakota’s claims expenses more than doubled from 2000 to 2009, from $547.9 million to $1.2 billion. Premiums also more than doubled during the decade, from $608 million to $1.3 billion.

“We are concerned that the future is not sustainable,” unless the cost trends are tamed, von Ebers said. “This is of major concern for us, and it’s a major concern for our customers.”

Chronic diseases and rare complex cases – “mega claims” of $250,000 or more – are behind most of the escalating costs.

To effectively manage chronic disease, such as diabetes, the traditional annual doctor’s checkup doesn’t work, said Dr. Greg Glasner, president and chief medical officer of Essentia Health in Fargo.

“It’s the chronic disease state that we have to target,” he said.

To more effectively manage those cases, the Blues are providing software to better chart health measures and outcomes. They also are paying doctors for consultations to manage chronic diseases.

To be more effective, health providers sometimes have to be more active in following up with patients, such as checking to see if they’ve stuck to their walking program.

“The old model just doesn’t work as well as we’d like,” said Dr. Rhonda Ketterling, chief medical officer of Sanford Health in Fargo.

For patients, according to the partners, the steps will provide several important benefits, including:

For doctors and hospitals, the initiative will mean a shift toward being paid based on measures of good treatment results, rather than simply paying for services delivered.

“The better the outcome,” von Ebers said, “the higher the pay.”

Blue Cross Blue Shield is doing its part to help decrease medical inflation by containing its administrative costs, now 7.6 percent, half the benchmark 15 to 20 percent mandated by national health reform, von Ebers said.

Because North Dakota already provides cost-effective care that national studies have shown is among the top quartile of states, and its tradition of working together to solve problems, the state is well-positioned to restrain health costs, he added.

“We’re starting from a good place,” he said.

Readers can reach Forum reporter Patrick Springer at (701) 241-5522