DMC strikes incentive deal for better care

Extra payments, penalties based on patient outcomes

By KEN CARLSON
kcarlson@modbee.com

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A nonprofit health care coalition has struck a deal with Doctors Medical Center in Modesto that includes incentive payments if the hospital meets quality standards for patient care and financial penalties if it doesn't.

The California Health Care Coalition says the program eventually could provide millions of Californians better care at lower cost.

Experts say some hospitals that charge the most have poor track records for patients getting infections in the hospital or for complications after surgery. The coalition says it chose to launch its initiative in Modesto because area hospital charges have been among the highest in the nation.

The coalition is made up of employers, labor organizations and union trust funds with 3 million members statewide, including 50,000 in Stanislaus County.

Within two years, the coalition hopes to have more than 35,000 people in Stanislaus County covered by the agreement. The group will try to negotiate similar deals with other hospitals in the Modesto area, Sacramento, the Bay Area and Southern California, said Sally Covington, executive director of the CHCC.

"We feel it's a very strong contract that will drive meaningful improvements in patient safety, quality, efficiency and price," Covington said.

The agreement is open to employers with self-insured health plans willing to join the coalition. It's not open to employers who purchase coverage from insurance carriers.

According to the coalition, the emphasis on quality should reduce health care costs and benefit patients using Doctors Medical Center.

A single patient acquiring a life-threatening infection in the hospital can run up $500,000 in costs for an extended hospitalization and treatment, said John Glynn, a consultant who works with the coalition. Often, the costs of those problems are paid by the employer's health plan.

Denny Litos, chief executive officer of DMC, said the pay-for-quality improvement incentive is the first he has seen in his 30-plus years in the health care industry.

"It's a unique opportunity to have a coalition of employers, unions and hospitals to work together," said Litos, who believes the hospital can pass the quality test. "This is an opportunity for Doctors Medical Center to create an excellent relationship with the business community."

The CHCC was formed in 2006 to organize public and private-sector employers and labor organizations that are dealing with runaway health care costs and want to see more accountability in the health system. Even before it registered as a nonprofit, its founders held meetings with major employers and labor groups in the Modesto area to discuss solutions.

The coalition said its agreement with DMC includes competitive prices and a process for evaluating improvements in patient care. It designates the CHCC to do quarterly performance reviews for member organizations that implement the contract with the hospital.

Each evaluation will look at data on mortality, infections acquired in the hospital and complications after surgery. Hospitals are required to report this kind of data to federal and state agencies and the Joint Commission, an organization that accredits U.S. hospitals.

59 quality standards

The hospital will be measured against 59 quality standards, such as the American Heart Association guidelines for the care of patients with coronary artery disease. If the hospital is performing well, it could receive hundreds of thousands of dollars in additional payments from employers each year.