CHARLESTON, W.Va. -- Cabin Creek community health center saved the state about $40,000 in the past year "while they improved the health care of more than 400 people," according to Public Employees Insurance Agency director Ted Cheatham.

PEIA is pilot-testing a new way to pay for nonhospital health care of the 200,000 state employees and family members.

Instead of paying for each service performed, PEIA paid a flat rate, per patient, per month for all the services Cabin Creek provides.

Instead of paying a "middle person," a managed-care company, the agency is contracting directly with West Virginia providers like Cabin Creek Health Systems.

"The data shows it's working," Cheatham said. "Everybody's a winner: the insurance company, the patients, the provider and the state," Cheatham said. "It saved money and improved people's health."

The Cabin Creek patients used specialists less and were hospitalized fewer days than PEIA patients statewide. They also got more preventive care than PEIA patients do statewide, Cheatham said.

As a reward for saving money, Cabin Creek will also soon receive a PEIA bonus check for about $20,000, Cheatham said. "We split any savings with the provider," he said.

Cheatham wants to expand the model to all 200,000 West Virginians covered by PEIA, he said. "First, we want to test it out in different settings and work out any bugs," he said.

PEIA is arranging new pilots at two hospitals, an internal medicine group, a private doctor's office and other community health centers, he said.

In each case, PEIA will use the three-tiered payment design: provide a flat rate, split any profits, and withhold 10 percent till the preventive statistics are in. The agency will calculate a different flat rate for each provider, Cheatham said, "based on their unique population risk and costs expected for that risk."

The agency doesn't guess at cost or performance figures, he said. They audit the provider's data.

The Cabin Creek pilot saved about $100 per person. If that rate were to hold statewide, the state could save hundreds of millions with this approach.

"I'm a firm believer that we need to change the way we pay for services," Cheatham said. "This is an attempt to do just that, to bring about a comprehensive medical home for patients."

"This kind of payment innovation is directly in line with the health reform law," said Perry Bryant, director of West Virginians for Affordable Health Care.

"People often think quality care has to be expensive care, and that's not true, particularly if you don't pay per procedure."

PEIA paid Cabin Creek $25 per month, per patient. "Whether the patient came 20 times or zero times, we got $25," said Craig Robinson, Cabin Creek CEO. That money covers all services Cabin Creek provides, including X-rays and access to the low-cost prescription drugs community health center patients can get.

PEIA patients in the pilot also did not have to fork over co-pays. Usually, they owe 15 percent of the bill. "The savings are so great under this model, we didn't need co-pays," Cheatham said.

"We expected that, if money was not an issue, people would be more likely to come in for care when they need it," Robinson said. "We found that was true." As a result, fewer manageable problems turned into an expensive crisis involving hospitalization, he said.

PEIA withheld 10 percent of Cabin Creek's payment until year's end, when statistics showed patients had received more than the expected rate of preventive care.

Eight out of 10 pilot patients got flu shots, for instance, compared with four out of 10 PEIA patients statewide. Ninety-six percent of women over 40 were screened for breast cancer, compared with 65 percent statewide. And 92 percent of appropriate patients were screened for colorectal cancer, compared with 66 percent statewide.

Amber Crist, Cabin Creek education director, credited Cabin Creek's team approach. "Each patient sees a doctor, but also gets other services as needed," she said. Teams include staffers who can help with nutritional, behavior, medical, prenatal and dental issues, she said.

Between medical visits, case aides "stay in touch with patients in a friendly way, to encourage them to take care of themselves," she said. An aide might "call and say, 'How're you doing?' chat a bit, then ask 'Have you taken your blood pressure medicine?'"

Cheatham said PEIA usually pays for a nurse to check on its members between visits, but "since they do it, we don't have to."

"If a patient is called by a friendly person they know, you get a better outcome than if a stranger from an out-of-state managed care company called them," said Dave Sotak, CEO of New River Health Association in Fayette and Raleigh counties.

New River will run a PEIA pilot project, Sotak said. "To me, it seems like the way to go. The provider gets a steady stream of revenue with some chance of incentives.

"We also very much like the fact that PEIA lets us know when our PEIA patients go into the hospital," he said. "That helps us provide good follow-up care after they come home."

Cabin Creek and New River are also part of a health reform pilot project which involves 10,000 working people, run by the state Department of Health and Human Services. That pilot, which also pays a flat fee per person, has just begun.

"We all should be watching these pilots," said Don Perdue, Chair of the House Health and Human Resource Committee. "The savings could be immense, compared with what we've got now."

The PEIA statistics are not all positive. During the past year, Cabin Creek pilot project patients visited the emergency room about 300 times during the year, instead of an expected 192 times, according to PEIA records. An emergency room visit typically costs far more than a private doctor or community health center would.

"That's our goal for the upcoming year," Crist said. "Reducing unnecessary ER visits."

In 2011, Cabin Creek PEIA pilot patients will sign a written agreement, she said, spelling out patient responsibility not go to the ER for care they could get through the center. "We have to make that clearer."

In a third pilot last year, Cabin Creek, New River, and FamilyCare in Kanawha and Putnam counties have been testing a team care approach to care of 1,500 chronically ill patients on Supplemental Security Income.

It's not possible to compare the results with a statewide average, Crist said, because Medicaid does not collect statewide medical data on patients like PEIA does. "But we think we'd see similar results."

Earlier this year, Medicaid stirred controversy with a plan to hire three out-of-state companies to manage care of 55,000 SSI patients. The companies would in turn pay state providers. Nobody else was allowed to bid.

"We were disappointed by that," Robinson said. "We've proven we get good results."

Ted Cheatham at PEIA is convinced. "If we can get this model streamlined into what I call Primary Care Modular System -- easy to administer claims-wise -- I would love to see all primary care in West Virginia go to this model."

Reach Kate Long at katel...@wvgazette.com or 304-348-1798.