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Dr. Chris Young, center, an anesthesiologist, checks on a patient during a surgery at Erlanger hospital. Young has been appointed president of the Tennessee Medical Association.


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Health care exchanges are new state-specific health insurance marketplaces that are scheduled to go into effect in 2014.

The exchanges will offer a choice of health plans, certifying plans that provide information to help consumers better understand their own options. Exchanges will primarily serve people buying insurance on their own and small businesses with up to 100 employees.

States are expected to establish exchanges -- but the federal government may step in if a state opts not to set one up, as is the case in Tennessee. The exchanges must be set up by Oct. 1 of this year.


Accountable care organizations offer doctors and hospitals financial incentives to provide quality care at less cost. The goal is to provide coordinated care to ensure that patients, especially the chronically ill, get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors and limiting readmission to hospitals. BlueCross BlueShield of Tennessee has set up an accountable care organization with Methodist Le Bonheur Healthcare in Memphis and is a third party administrator for another such ACO with St. Thomas Hospital in Nashville.

Source: Henry J. Kaiser Family Foundation Health Reform Source

Tennessee's biggest health insurer and Chattanooga's biggest hospital are joining in a five-year network agreement officials hope will lead to better and less costly health care, especially for many of the 25,000 Chattanooga-area residents expected to join one of the new health exchanges coming on the market next year.

BlueCross BlueShield of Tennessee and Erlanger Health System announced Tuesday they will join in a "strategic partnership" July 1. The unique network agreement, which is longer and more involved than most insurance and hospital payment arrangements, is designed to boost the number of paying patients at Erlanger while limiting the costs of care for BlueCross and its members.

"This is one of the most creative things I've experienced in my entire career, that the payer is investing in the hospital to bring alignment and cost-effectiveness in the system," Erlanger CEO Kevin Spiegel said Tuesday. "They believe that driving efficiency in the entire system is what is going to drive health care costs down in this entire country."

The agreement will keep Erlanger in BlueCross' existing networks through at least 2018 and make Erlanger the exclusive Chattanooga hospital in the new BlueCross Network E, which will cover those who sign up for one of the new health care exchanges under the federal Affordable Care Act.

The alliance is the first of its kind for BlueCross, although the insurer has formed or bought even more sweeping Accountable Care Organizations in Memphis and Nashville. In such arrangements, hospitals share in the financial risks and rewards of treating people in their network. In exchange for giving quality guarantees or price discounts to BlueCross members, the hospitals receive more patients by being a part of a more exclusive or preferred provider network.

"We believe this is a partnership of strengths that provides real stability and value for Chattanooga and beyond," BlueCross CEO Bill Gracey said in announcing the agreement. "Through this agreement, we will work together to further advance care quality and patient outcomes in meaningful ways."

BlueCross is the state's biggest health insurer, and the new network agreement ensures Erlanger will continue to participate in all BlueCross provider networks, including its commercial P, S and V plans, along with BlueCare, TennCare Select and BlueAdvantage.

BlueCross is among the insurers planning to administer one of the new health exchange plans being set up by the federal government under the Affordable Care Act. The new plans are expected to attract about 300,000 Tennesseans, including 25,000 in the Chattanooga area.

Half of the new health exchange subscribers are expected to come from those who switch from commercial insurance plans to the new government-backed health exchanges. The other half are expected to come from uninsured individuals or small businesses who will be required to buy health insurance or pay an annual tax penalty.

Memorial and Parkridge hospitals in Chattanooga will remain in most BlueCross networks and in some of the broader and more expensive health exchange plans to be offered next year. But the cheapest plans for members will have a narrower network and include only Erlanger for residents of Hamilton and Bledsoe counties where Erlanger has facilities.

Memorial Health Care executives Issued a short statement about the BlueCross-Erlanger partnership:

"As the region's only faith-based health system, Memorial is the preferred provider of cardiology, orthopedic, and oncology services. We will continue to provide the highest quality medical care to those who entrust their health care needs to the more than 150 primary care physicians, specialists and cardiologists in the Memorial Health Care System."

BlueCross Vice President Roy Vaughn said BlueCross and Erlanger are still working out the details of the partnership, but both parties are making what Vaughn called "a significant investment in innovative new approaches" to identifying and implementing more cost-effective health care. The new arrangement should encourage more coordinated care of patients and offer targeted treatment and aftercare services for chronically ill or injured persons.

"Rather than pursuing the old model of fee-for-service payments, we want to structure our payments to providers around performance and health care outcomes," Vaughn said. "We want to work to set the right measurements and share the right data to help that happen."

BlueCross spokeswoman Mary Danielson said the company wants to replicate the accountable care organizatons or strategic partnerships it has formed with the major tertiary care hospitals in Chattanooga, Nashville and Memphis with other such hospitals in Knoxville, Tri-cities and other major markets.