LIVERMORE FALLS — Franklin Memorial Hospital has recently made a commitment to rein in health care costs.

It includes lowering costs to below the state average without shifting costs to commercial or private payers and creating the ability to thrive on a Medicare level of payment for everyone, Gerald Cayer, Franklin Community Health Network executive vice president announced Friday. He spoke to the media at the Androscoggin Valley Medical Arts Center.

The hospital will redefine health care costs by episode with each diagnosis assigned a cost, using the federal government’s method of paying for services for Medicare and establishing a new fee schedule model for laboratory and radiology.

Starting July 1, the hospital expects to drive costs down by 4.7 percent or $900,000 for commercial and private payers during the first year.

The AVMAC model highlights six areas of focus for the hospital change that includes finding and creating efficiencies in operation while refining care that focuses on health and wellness of the population instead of units of service delivered to patients, he said.

At the Livermore Falls center, primary care, X-rays, mammograms and other services are offered, curtailing the need for hospital care.

The new focus includes access to primary care, specialty clinics in more efficient buildings, choosing best practice/evidence based options for high cost diagnostic procedures, refined care of those with chronic illness, better end-of-life care management and allowing and supporting sometimes uncomfortable discussions  regarding unlimited access and unlimited choice.

The reality is health care costs are not sustainable, Rebecca Ryder, FMH president/CEO said.

The country spends $2.5 trillion per year on health care.

Sixty percent of health care dollars are spent on 10 percent of the population as more chronic illness surfaces, including those fostered by rising obesity rates and aging populations.

Health care costs are tied to the future of the state’s economy, said Elizabeth Mitchell, chief executive officer of the Maine Health Coalition.

Businesses shy away from Maine’s high health care costs while Maine business owners struggle to provide options for employees.

Ryder said FMH faced two options: Continue as is with the present fee for services or step out and do the right thing.

The FMH leaders pondered the questions, “Just imagine: if we could not fail, what would we do. If we cannot fail, what do we need to do,” she said.

“It’s like having one foot on the dock with the present fees for service and the other foot in a tippy canoe. It takes a leap of faith. I have a lot of faith,” she said.

Now the work continues to figure out how to do it, including engaging the patient in decisions on appropriate care, working smarter, reducing costs and waste, being good stewards of health care, she said.

“Resources are not infinite,” Ryder added.

FMH is moving to episode-based care, Cayer said. A single price for all services needed by a patient for an entire episode of care such as a heart attack or appendicitis poses better health care quality and controlled costs.  An episode payment can reduce unnecessary testing and services while also giving more flexibility to decide on the services needed without the constraints of fee codes and amounts.

Hospitals are facing the need for major changes with one out of three hospitals predicted to close or drastically change by 2020.

Promoting wellness and making choices away from hospitalization is expected to bring costs down but will be a cultural change for everyone, they said.

A new and unique undertaking, the hospital has also recently partnered with the State Employee Health Commission and others to bend the health care cost curve, Cayer said.

The partnership fosters incentives for choosing care options through FMH and reducing hospitalizations, said Frank Johnson, executive director of the commission.

There are 40,000 lives throughout the state including employees, dependents and 10,000 retirees under the health commission which is facing state reductions during this current fiscal year and next, an expected $22 million in planned reductions by 2013, he said.

There are 650 members in the FMH care area. Reducing costs and giving benefits, less out of pocket expenses, to them to use FMH is a win-win, Johnson said.

The new program will be watched over the next couple years with an intention to share the model in different parts of the state, he said.

abryant@sunjournal.com