Aetna And Hoag Orthopedic Institute Collaborate With McKesson On Innovative Automated Bundled Payment Initiative

NEWTON, Mass., March 21, 2012 — McKesson has collaborated with Aetna (NYSE: AET) and Hoag Orthopedic Institute of Orange County, California, to create the first automated implementation of the Integrated Healthcare Association’s (IHA’s) bundled payment model. With a potential to reduce health expenditures in the United States by as much as $300 billion between 2010 and 2020, according to The Commonwealth Fund, bundled payments for episodes of care represent one of the most promising approaches for controlling healthcare spending while improving patient outcomes.

Rather than pay each caregiver separately for the services he or she provides, the bundled payment approach establishes a set, comprehensive fee for a given episode of care, such as a total knee replacement. This process aims to encourage the delivery of evidence-based care while reducing complications and duplicated services. Automating the new bundled payment models is critical to addressing the inherent administrative challenges of the bundling process.

In April 2010, IHA, a multi-stakeholder leadership group promoting quality healthcare in California, announced the Bundled Payment Initiative. The initiative’s goal is to create bundled payments for specific medical procedures to improve healthcare efficiency, generate cost savings and improve healthcare outcomes.

Aetna, McKesson and Hoag Orthopedic Institute are implementing an automated bundled payment model for knee replacement surgery that was developed through IHA by physician organizations, hospitals and health plans. The new approach is now available for Aetna’s commercial members who meet the qualifying criteria and are seeking care from three specific orthopedic surgeons at Hoag Orthopedic Institute.

IHA Executive Director Tom Williams commented, “The infrastructure required to support these initiatives is absolutely crucial. We applaud the efforts of Aetna, McKesson and Hoag Orthopedic Institute to efficiently manage the complexity of episode payments with automated solutions.”

“We believe that bundled payments will reduce medical costs and improve the quality of care, which will result in better patient outcomes. Further, bundled payments, particularly when automated, can increase operational efficiencies to provide additional value to both our members and our plan sponsor customers,” said Elizabeth Curran, head of Aetna’s National Network Strategy and Program Development.

Aetna and McKesson share a long history in payment management and worked together to automate the IHA approach. Aetna is using McKesson Episode Management™, a highly configurable, rules-based software application that leverages ClaimsXten™ and other leading McKesson solutions for optimizing clinical decision support and automating complex payment decisions. Available in both application service provider (ASP) and customer-hosted options, McKesson Episode Management allows plans to automate scalable bundled payment programs, from episode initiation through bundling and payment, supporting diverse claim types and payment methodologies within existing claims systems and workflows. In addition, McKesson expert services are available to support program design, streamline implementations and optimize value.

According to Melanie Marcus, vice president, Emerging Solutions, McKesson Health Solutions, “McKesson recognizes that it is in a unique position to facilitate transformation by helping payers and providers further break down the barriers to collaboration — such as overly complex processes — by automating and optimizing their financial and clinical management initiatives. We anticipate that our collaboration with Aetna and Hoag Orthopedic Institute to implement the IHA bundled payment initiative will encourage nationwide adoption of these promising payment reform methodologies and promote integrated, high-quality care.”

About Aetna
Aetna is one of the nation’s leading diversified health care benefits companies, serving approximately 36.4 million people with information and resources to help them make better informed decisions about their health care. Aetna offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioral health, group life and disability plans, medical management capabilities, health care management services for Medicaid plans and health information exchange technology services. Our customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers, governmental units, government-sponsored plans, labor groups and expatriates. For more information, see www.aetna.com.

About the Integrated Healthcare Association
The Integrated Healthcare Association (IHA) is a not-for-profit multi-stakeholder leadership group that promotes quality improvement, accountability and affordability of health care in California. IHA administers regional and statewide programs, serves as an incubator for pilot programs and projects, and actively convenes all health care parties for cross sector collaboration on health care topics. For more information on IHA, please visit www.IHA.org.

About Hoag Orthopedic Institute
Hoag Orthopedic Institute (HOI), which is partially owned by physicians, consists of a 70-bed hospital located in Irvine, California, and the Orthopedic Surgery Center of Orange County, an ambulatory surgery center located in Newport Beach, California. HOI also holds a controlling interest in Main Street Surgery Center, an ambulatory surgery center located in Orange, California. Comprised of over 319 physicians on staff, which include 66 board-certified orthopedic specialists, annually they have performed over 16,000 cases, which include the diagnosis and treatment of knee and hip replacement, spine, sports medicine, orthopedic trauma and extremities care both in inpatient and outpatient settings. HOI’s hospital was selected in 2011 to be one of the first three hospitals to participate in an innovative patient registry database that tracks long-term patient outcomes by the California Joint Replacement Registry. HOI’s hospital was recently named by Becker’s Orthopedic, Spine & Pain Management Review as one of the top orthopedic hospitals in the nation. For more information, visit http://orthopedichospital.com.

About McKesson
McKesson Corporation, currently ranked 15th on the FORTUNE 500, is a healthcare services and information technology company dedicated to making the business of healthcare run better. We partner with payers, hospitals, physician offices, pharmacies, pharmaceutical companies and others across the spectrum of care to build healthier organizations that deliver better care to patients in every setting. McKesson helps its customers improve their financial, operational, and clinical performance with solutions that include pharmaceutical and medical-surgical supply management, healthcare information technology, and business and clinical services. For more information, visit http://www.mckesson.com.