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HSS staff directed to draft policy reserving excess underwriting gains for ACO incentive payments after Blue Shield ACO review
Summary
After presentations from Blue Shield and local medical groups showing reductions in inpatient days, readmissions and ER visits, the Health Service System board directed staff to develop a policy to reserve underwriting gains to fund ACO incentive payouts and clarified how unused funds would revert to the Blue Shield stabilization reserve.
The San Francisco City Health Service System board directed staff to develop a formal policy to reserve excess underwriting gains to pay ACO incentive targets after a detailed presentation on the Blue Shield ACO model and early results.
Director Catherine Dodd outlined the ACO approach and said the program has produced measurable improvements: inpatient days per thousand down 8.1%, average length of stay down 10%, 30‑day readmissions down about 7.2%, emergency‑department visits down 7.7%, and generic prescription utilization up 12.4% in participating medical groups. “These metrics point to the success that our HMOs have had over these years,” Dodd said.
HSS’s contracted actuary, Anil Kosher, and representatives from Brown & Toland and Hill Physicians explained how the ACO structure shares savings and funds incentives. Kosher described tiered targets and a roughly 50/50 split of savings between HSS and the ACO when targets are met; he gave an example where hitting a mid‑level target could yield a multi‑million dollar payout to the medical group and associated facilities under the negotiated allocation.
Richard Fish, CEO of Brown & Toland, described operational changes that reduced readmissions and improved discharge planning: dedicated teams contact patients three days after discharge, verify medication pickup and follow‑up appointments, and coordinate hospital‑to‑clinic handoffs. Hill Physicians’ Terry Hill described pharmacy outreach and care‑transition programs that aim to reduce avoidable utilization.
On the recommendation presented by Aon Hewitt, the board voted to direct HSS staff to develop a policy that would reserve excess underwriting gains for ACO incentive payments and release unused funds to Blue Shield’s stabilization reserve if targets are not met. The board also asked staff to codify the accounting treatment and maximum payout calculations so auditors and stakeholders can trace funds on the balance sheet.
Next steps: Staff will draft the policy language and return with a recommended policy and implementation plan for board approval. The motion was adopted by voice vote.
