By Christopher Guadagnino, Ph.D.

Published June 2000

• React to this article in the Discussion Forum.

Anthony V. Coletta, M.D., is Chairman of the Board of the Renaissance Medical Management Company and CEO of the Renaissance Health Alliance.

PND: Can you describe what Renaissance Health Alliance is?

AC: It’s a collaborative partnership between Independence Blue Cross (IBC), through their subsidiary Keystone Health Plan East, and the Renaissance Medical Management Company with the mission of providing the highest quality and most cost-effective care that we can to patients that are enrolled in the plan. The business vehicle is a separate company that we’ve named the Renaissance Health Alliance that’s owned and capitalized 50 percent by IBC and 50 percent by Renaissance Medical Management Company with the risk shared by both entities.

PND: What will this joint venture do?

AC: Renaissance Health Alliance is the business vehicle as a joint venture. A percentage of the premium negotiated between Renaissance Medical Management Company and IBC will flow into the joint venture and be used to pay for the full spectrum of care for the patients assigned to the contract. The medical management of those patients is being delegated by Keystone to our company, the Renaissance Medical Management Company. So in essence, Renaissance Health Alliance is the vehicle that brings the two parties together, where the financial and resource risk sharing takes place. Medical management includes hospitalizations, referrals, authorizations for treatments, risk profiling, disease management programs and all the things that HMOs would traditionally do on the medical management side. Those functions have been delegated to Renaissance Medical Management Company. Keystone Health Plan East continues to sell the plans, market the plans, administer them, pay the claims and meet the state and regulatory requirements for insurance companies.

One of the reasons why the HMOs have met with limited success in implementing their programs has been because of an outside-in type of management, with the HMO telling the doctor what to do. We will have internal medical directors who are clinically practicing physicians. We’ll have our own utilization nurses. We’ll be setting up the disease management programs, the clinical protocols, the retrospective and prospective and concurrent review of patients’ care, setting up the guidelines internally and implementing them internally.

Renaissance Medical Management Company has formed a partnership with Valence Health, our third party administrator, that brings a medical management infrastructure so we don’t have to create it de novo. Valence has information systems that are already compatible with IBC’s information systems and will allow us to take raw information from IBC and format it into clinical reports that we could use for our internal purposes among the doctors. Valence already has experience with IBC in the Philadelphia market and is certified to do delegated medical management in the state of Pennsylvania.

PND: How many physicians will be involved in the joint venture?

AC: Renaissance Health Alliance physicians represent a subset of two physician organizations: Chester County Physician Organization and Millennium Physician Organization, which together function as a large IPA and have a combined membership of 400 to 450 physicians, of whom about 100 are primary care physicians. The two physician organizations are managed by a holding company called Renaissance Medical Alliance, the entity that founded Renaissance Medical Management Company. Renaissance Medical Management Company, which is our part of the joint venture with IBC, is a separate, for-profit business corporation in which participating doctors have equity ownership and could potentially attract outside investment.

From the Chester County and Millennium physician organizations, about 40 primary care physicians became founding physicians of Renaissance Medical Management Company and about 150 specialists have indicated their intent to participate at the outset. We intend to build regional specialist networks for each locally-based group of primary care physicians who are involved in the company to provide concurrent management of hospitalized Renaissance Medical Management Company patients. We are very interested in having specialists who understand our concepts to be actively involved in their care. As we build clinical pathways and policies and procedures for disease management, we want the specialists to collaborate with the primary care physicians in putting together and implementing those kinds of programs.

PND: How many patients will be involved in the venture and how will it be funded?

AC: Keystone patients, both commercial and Medicare, who identified those primaries as their doctor—they’re the patients whose revenues are assigned into this contract, initially. That’s about 10,000 patients. The combined premiums, totaling $30 million dollars a year, minus a piece that’s been negotiated with IBC that they hold onto for their own administration, are assigned to Renaissance Health Alliance. One of the unique aspects of this arrangement is that there’s cash flow immediately through the joint venture. In a typical risk deal what has happened up until now is that the insurer negotiates a contract with a provider for whatever percentage of risk—and most of the time in Philadelphia it’s been full risk—but doesn’t delegate medical management to the provider. Hospital systems traditionally have tried to internally do their own medical management but it has no real impact on the actual care of patients because the insurer is still doing the medical management. The insurer then goes back to the provider after a year and says, "Okay, we assigned X percentage of dollars of the premium to this contract. You spent Y." And if Y is more than X then the provider owes the insurance company more money. Over that course of that year the provider has funded their own administration and tried to do the best they can, but the insurance company has kept all of the information and has actually handled all the cash flow.

PND: What area will the entity serve?

AC: It’s a good part of Montgomery County, mostly the Main Line, and some primary care doctors in Norristown; just about all of Chester County, especially involving Chester County, Brandywine and Southern Chester County hospitals; then the northeastern corner of Delaware County with doctors mostly in the Riddle Hospital area. We will start in these three counties. After the first year, depending upon whether or not we’ve met certain performance parameters set by the board of the joint venture—such as solvency of the network and enrolling patients in disease management programs—we then will begin to move out into additional counties, Philadelphia County especially. We don’t want just growth for the sake of growing and then find ourselves a year or two from now in a situation where we have grown beyond our own internal capabilities to manage it, which is, we think, the mistake that’s been made in the Philadelphia market by some of the integrated delivery systems.

PND: Who determines medical necessity?

AC: We do, Renaissance Medical Management Company. Ultimately IBC through its subsidiary Keystone is responsible for oversight when they delegate medical management, under state and federal regulatory requirements. They have to ensure that we have the proper policies, procedures and infrastructure in place to responsibly handle that medical management. They have to audit and oversee that we are living up to the letter of the law for which they are ultimately responsible. So they have an oversight responsibility, but handling preauthorizations and determining what’s medically necessary has become the responsibility of Renaissance Medical Management Company. IBC has the ultimate authority to arbitrate those decisions, but the front line for those decisions is us. Primary care physicians will be assigned to regional care committees headed up by one or two local part-time regional medical directors who are clinically practicing physicians. Ultimately we hope to have them meeting electronically over the Internet, all of this infrastructure being overseen by our own chief medical officer.

PND: How are other duties delegated?

AC: Utilization review and quality assurance is done by Renaissance Medical Management Company. Credentialing continues to be done by IBC. You have to be credentialed in the Keystone network or the IBC network to be part of this deal. IBC is paying the claims. None of the IPAs in Philadelphia have ever done any of that stuff. They said they wanted to, and in fact we had talked for years about doing those things. But if you look at other parts of the country and here in the Philadelphia market you’ll find that most of the IPAs and even the physician hospital organizations are not capitalized well enough or have enough infrastructure to actually handle those functions, especially paying claims. We have no intention of trying to replicate the claims payment systems of IBC. It costs way too much money and takes away too much time in infrastructure to pay insurance claims. As I understand it, there are some entities in the Philadelphia market who attempted to pay claims. Those entities went bankrupt and the insurance companies were on the hook as creditors. One of the reasons why we felt a joint venture was a positive business model to pursue is that we will need timely and accurate claims information from IBC in order to manage both the medical management and the financial aspects of the deal. In a full risk situation where the insurer’s head is not in the game, the provider entity runs the risk of not getting that timely information.

PND: Physicians and hospitals have lamented over the negative impacts of the health insurance market dominance enjoyed by IBC and Aetna U.S. Healthcare in southeastern Pa. What impact will that dominance have on your venture?

AC: There are pluses and minuses in being in a market like Philadelphia where’s there’s only one or two dominant insurers. I think if you were to do a joint venture like this in a market where there were 12 insurance companies with an insurer that had five percent of the market, I don’t think you would be nearly as potentially powerful and dynamic. You take 40 primary care physicians and what you find is you have 10,000 Keystone patients. Name recognition, sheer volume of patients, infrastructure, market presence, leverage for Renaissance vis-a-vis recognition in the market with other physician organizations, other hospital systems—that’s what we gain.

PND: You probably are aware that the AMA and the Pennsylvania Medical Society jointly requested that the U.S. Department of Justice investigate what they say are anti-competitive practices of IBC and of Highmark Blue Cross Blue Shield in western Pennsylvania. You seem to be adopting a different approach to redressing the apparent imbalance in market power enjoyed by IBC.

AC: I think that filing does appeal viscerally to physicians who would be either current members or potential members of those medical societies, so I think it is probably a good move on the societies’ part to help shore up their membership. On the other hand, I don’t think it does anything at all to address the real problems of delivery of health care in the Philadelphia market. The problem is not health insurance company market dominance. The problem is that physicians, insurance companies and hospitals are the three key entities that need to work collaboratively to solve the problems with the way care is being delivered, especially in the Philadelphia marketplace. None of those three parties should be considered white knights. The physicians remain loosely organized at best. We don’t do internal review. We don’t do collective peer review in a fashion that translates on a regular basis to higher quality care. We don’t do continuous process improvement internally. We remain a highly fragmented group and oftentimes seeking our own self-interest. That is not doing anything to solve the problem. Hospitals have come together into these large integrated delivery systems and, if you look at what’s happening in the last couple of years in Philadelphia, resources have been squandered in certain situations—tens of millions and hundreds of millions of dollars. That speaks for itself. So, to turn around and point fingers at insurance companies and say they’re market manipulators and let’s go after them, to me does absolutely nothing to solve the problem. I think our approach is fundamentally different. That is, we recognize that patients are at the center and that there are aspects of what the insurance companies do that are extremely valuable if it can be translated into the right clinical format and utilized by the right people. We’re trying to go at it from that standpoint. I think these lawsuits that have come up in the Philadelphia market and this finger pointing will probably, for the most part, serve the law profession more than it does the medical profession.

PND: Physician reimbursement in Philadelphia is among the lowest in the country, according to Stephen Foreman, the economist commissioned by the PMS. Have you gotten any assurances from IBC that physician reimbursement will increase?

AC: What we achieved in our deal was that physician reimbursement for Renaissance Medical Management Company doctors will not go any lower than it is now. In the Health Alliance model, assuming that we actually do come together as the multi-specialty organization of physicians, provide higher quality and more value-oriented care, and we impact upon unnecessary hospital utilization, there will be additional dollars in that joint venture and 25 percent of the medical management company’s profit will be redistributed back to the doctors in form of cash bonuses based on performance. Those performance parameters will be developed internally by Renaissance Medical Management Company doctors. Primary care physicians are reimbursed by capitation through Keystone. In addition, they have a 10 percent increase in their capitation for the first year that they participate above and beyond their present payments from Keystone. After the first year if the company is profitable each primary will have either more or less of a capitation bonus based on their own performance. Specialists are paid at Keystone’s current fee-for-service rates. But once the joint venture is profitable they also will be eligible for portions of that 25 percent bonus that goes back to the doctors. So, this would be the first model in the market that even gives physicians a chance to gain access to additional reimbursement.

The fact that the physicians in this market are reimbursed at a rate lower than most markets is a business dynamic. This is precisely one of the reasons why we put Millennium together five or six years ago, because it’s highly predictable that in Philadelphia the fees being paid to hospitals and physicians would be driven down as far as they could go. That’s what happened in all the other markets that were going through managed care transformation: to one degree or another fee-for-service reimbursements were driven down as low as they could drive them. That’s the Us versus Them business dynamic that we think our joint venture will begin to affect. That means that both parties—IBC and Renaissance Medical Management Company—need to step up and do what they say they can do. That remains to be seen.