Penn Medicine teams up with Independence Blue Cross in primary care venture

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Primary care physicians – traditionally among the lowest-paid physicians – are hot topics for corporate giants these days.

Amazon agreed in July to pay $3.9 billion for One Medical, a company with 182 primary care offices in 25 U.S. markets. CVS and Walgreens are opening doctor’s offices in pharmacies. Humana Inc. and CVS are trying to buy another big primary care provider, Cano Health Inc., The Wall Street Journal reported last week.

Driving this activity is a long overdue but extremely gradual change in the way health care is paid for in the United States. Private health insurers and Medicare are increasingly reluctant to pay ever more money for more tests, treatments and hospital stays. Instead, they want to tie doctors’ and hospitals’ compensation to their success in managing patients’ chronic conditions and maintaining people’s overall health.

That’s the background to the University of Pennsylvania Health System’s decision, to be announced on Tuesday, to invest in a subsidiary of Independence Blue Cross called Tandigm Health, which was founded in 2014 to help healthcare doctors contracted primary care to improve care and reduce costs by proactively trying to prevent disease.

Penn will also add 275 of its primary care physicians and 100 additional advanced practitioners to the 400 primary care physicians in southeastern Pennsylvania who already have contracts with Tandigm. Tandigm currently helps manage the care of 110,000 people for its doctors. Penn will add approximately 200,000 patients to this pool. Financial terms of Penn’s deal with West-Conshohocken-based Tandigm were not disclosed. The agreement takes effect on January 1.

Health System Chief Executive Kevin Mahoney said Penn’s motivation for the primary care collaboration is recognition that the traditional “fee-for-service” model, in which doctors and hospitals earned more money by providing more services, is likely to go one way.

Insurers want to replace this system with “value-based care,” meaning payments are based on quality of outcomes and patient satisfaction. Another key part of the new way of doing things – pardon the lingo – is “population health management”. This more or less means that physicians are responsible not only for the health of the patients who come to their practice, but also of their patients who do not.

“In the fee-for-service world we lived in, we dominated advanced care and advanced medicine,” Mahoney said. He wants Penn “to be the dominant player in both cutting-edge medicine and community medicine, value-based care.”

Rather than trying to accomplish this on his own, Penn was “better to partner with someone who had already demonstrated great success,” Mahoney said.

Tantigm’s core technology analyzes massive amounts of patient data to predict future illnesses, identify high-risk patients and suggest what doctors should do to close gaps in individual patient care, Frank said. Ingari, CEO of Tandigm.

Tandigm does not have a doctor’s office. The doctors at Tandigm are eligible for bonuses if they meet patient satisfaction and quality targets.

Ingari said this new approach to health care is needed as baby boomers transform into frail elderly people.

As this population moves from 65 to 75 to 85, many of them will have chronic conditions and often more than one, Ingari said. “These conditions are generally not subject to cure, and they certainly do not have a procedure to correct them. What you’re talking about is chronic disease management.

It’s why Tandigm exists and it’s why Amazon.com Inc., CVS Health Corp., Humana Inc. and others are pumping billions into primary care. Other companies operating in the Philadelphia area with a similar approach to Tandigm are publicly traded Oak Street Health Inc., which has 10 clinics in Philadelphia, and ChenMed LLC, which has four.

“It is reassuring that the market recognizes the importance of primary care physicians in helping to coordinate the delivery of care to their patients,” said Gregory E. Deavens, President and CEO of Independence.

Deavens credits Tandigm with helping boost the star ratings of his Medicare Advantage plans. Federal regulators award stars to private health insurance plans based on patient experiences. Independence’s Keystone 65 HMO plan received five out of five stars for the first time last year. Another Independence plan received its highest rating of 4.5 stars.

“They have been vastly improved through the work done in Tandigm with this network of primary care physicians,” Deavens said.

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