HealthPartners and Allina Health are forming a new cooperative arrangement to create financial incentives for healthier outcomes and lower costs for patients.

The new arrangement by the competing health care providers applies to roughly 150,000 people across the state who get care at Allina hospitals and clinics but have HealthPartners as their insurer.

The arrangement provides Allina financial incentives to do things such as cut down on hospital admissions or readmissions through routine and preventive care, sharing of electronic health information, and better screening for social determinants of health.

The five-year partnership continues a trend of "accountable care" and "value-based" relationships among organizations that traditionally compete or work at arm's-length. Rather than pay a fee for each service, accountable care groups set up financial incentives for better patient outcomes and more efficient operations.

Allina Health, based in Minneapolis, is a health care provider with 11 hospitals and more than 100 clinics and pharmacies. HealthPartners, in Bloomington, is both a payer and provider that operates a health plan with 1.8 million medical and dental members nationwide, and runs a network of nine hospitals and more than 300 clinics. Both organizations are not-for-profits with locations in Minnesota and western Wisconsin.

Though they compete for patient revenue as traditional fee-for-service health systems, Allina and HealthPartners have also worked collaboratively for years.

The arrangement announced this week follows what the organizations said is a successful private accountable care organization, or ACO, called the Northwest Metro Alliance.

Since its founding in 2010, the alliance has seen $40 million less in patient-care expenses than it otherwise would have, by coordinating care among five Allina clinics, four HealthPartners clinics, the Mercy Hospital campuses in Coon Rapids and Fridley, and the jointly run RiverWay Pain Clinic.

For example, the hospital-readmission rate declined after the alliance jointly prioritized better patient education during initial hospital discharge and improved scheduling of five-day follow-up appointments.

Coordination between Allina's Mercy Hospital and nearby HealthPartners clinics led to 26 fewer hospital readmissions overall from August 2019 to July 2020 than would have been expected. An average readmission includes about $8,000 in hospital costs and more than $14,000 in additional expenses, the systems said.

The Northwest Metro Alliance is under contract to operate through 2022, but Allina and HealthPartners' new "value-based relationship" has been established to run for a five-year period, CEOs of the systems said.

Unlike the alliance, the new arrangement pertains only to patients who have Allina health care providers and HealthPartners insurance.

"It's a value-based arrangement built on a long-term relationship between two organizations that some would see as competitors, but we see as collaborators, to improve the health of the community," Allina Health CEO Dr. Penny Wheeler said Tuesday.

Beneficiaries and patients will be automatically included in the new arrangement, and there shouldn't be any noticeable changes for them, such as new billing paperwork or changes in the network.

The new payment model is confidential. The organizations say it gives Allina financial incentives to provide population-based health care that lowers overall costs and increases efficiency.

Without such hidden incentives, Allina's work in driving down the costs of care among this group would just benefit HealthPartners' insurance business, through lower expenses. A key component of accountable care and value-based arrangements is that savings are shared among the parties.

"People need health care to be more affordable, and we also know the key to affordability is making sure people have access to high-quality care. Oftentimes, the payment structures between health plans and care systems aren't structured to align those incentives," HealthPartners CEO Andrea Walsh said Tuesday.

Joe Carlson • 612-673-4779