Group Health Cooperative and Tacoma-based Franciscan Health System have signed a five-year contract aimed at reducing costs and providing a more seamless experience for patients.

Since 1996, Group Health has sent South Sound patients needing hospital care to Franciscan facilities, primarily St. Joseph Medical Center in Tacoma. Under the new five-year agreement — a renewal and expansion of the previous contract — both sides say they will work on such goals as reducing hospital readmissions through close, early management of chronic diseases and collaboration between hospitals and patients' primary-care doctors.

The contract doesn't detail the end result of the new contract, which both partners say reflects a commitment to go beyond Group Health members simply getting care in Franciscan hospitals. The goal, they say, is to explore new and different models for how to deliver care that would improve outcomes and increase patient safety while keeping a lid on costs.

The partnership could result in new insurance products, the two say, that could build on Group Health's model of a per-patient billing system, rather than the more typical fee-for-service model that pays for each episode of care.

Franciscan's Chief Operating Officer Dr. Cliff Robertson said Group Health has "years and years of experience around the focus on wellness — keeping people healthy and delivering care in a way that's more comprehensive and more holistic. We very much value that."

Group Health invests heavily in primary care, noted Group Health Cooperative President and CEO Scott Armstrong, a move that has helped to lower costs and keep patients from needing unnecessary hospital care.

Nationally, more than 20 percent of Medicare patients are readmitted to the hospital within 60 days of discharge, he noted. In collaborative work with other hospital partners, such as Virginia Mason Medical Center and Overlake Hospital Medical Center, Group Health has made great strides in reducing that percentage, Armstrong said.

The need for coordination of patients' care to reduce costs and improve outcomes has helped drive partnerships and strategic alliances among medical centers and health-care organizations, health-care experts note.

Group Health, a nonprofit Health Maintenance Organization, with its subsidiaries Health Options, Inc. and KPS Health Plans, provides insurance to more than 664,000 state residents, most receiving care at Group Health Medical Centers locations around Puget Sound and in Spokane. But the HMO does not operate hospitals and partners with health systems that do.

Franciscan Health System, also nonprofit, operates five hospitals in Pierce, south King and Kitsap counties. It is part of Catholic Health Initiatives, a national health organization based in Colorado.

Carol M. Ostrom: 206-464-2249 or costrom@seattletimes.com. On Twitter @costrom.