The University of Pennsylvania Health System announced Friday that it had cut hospital readmissions by one-quarter in the first year of its new-style contract with Independence Blue Cross, surprising both parties.

"This not only exceeds our expectations," said Independence chief executive Daniel J. Hilferty, it also sets the stage for similar efforts with other health systems, "as we work to improve our members' experience and drive down costs."

Under the five-year contract, which took effect July 1, 2017, Independence  no longer has to pay Penn when patients return to the hospital within a month of being discharged.

Hilferty said in April that the change was expected to save the insurer $19 million to $20 million annually. Independence is the region's largest health insurer, while Penn is the area's largest health system by revenue.

"Whenever you implement something new like we did in this program, you expect to learn a lot during the first year, but it usually takes more time to see results like this," said Ralph W. Muller, chief executive of Penn's health system.

"Through close attention to what our data told us about the patients we needed to focus on, and a dedicated and creative push by teams at both Penn and Independence, we've set a new high mark for reducing readmissions in a far shorter time frame than anyone expected," he said.

Penn did not provide the specific number of readmissions that were prevented by the collaboration with Independence, but Kate Flynn, president of the Health Care Improvement Foundation in Philadelphia, said she found the results impressive.

"Things like remote monitoring, the very intensive case management, the coordination with home care, those are not typical things. Many hospitals have done pieces of that," Flynn said.

Flynn said that when Medicare first instituted readmissions penalties in the 2011-12 time frame, hospitals quickly captured much of the "low-hanging fruit," but then progress stalled because certain chronic conditions are so hard to manage.

Penn attacked the problem by identifying patients at high risk of readmission, including many with cancer, heart disease, gastrointestinal conditions, and sepsis. High-risk patients returned to the hospital 16 percent of the time, Penn found, while low-risk patients were readmitted less than 1 percent of the time.

The contract covered 15,000 inpatients in the year ended June 30 at the Hospital of the University of Pennsylvania, Penn Presbyterian Medical Center, Pennsylvania Hospital, and Chester County Hospital.

Under the new model, before Penn discharges patients with a high risk of readmission, a scheduler calls them to set up all their follow-up outpatient appointments – typically combining them on the same day. Penn developed dashboards to track follow-up visits at seven and 14 days after discharge to ensure patients stay on track. Most patients now also leave the hospital with all their prescriptions in hand to avoid any delays in taking medications.

The contract motivated Penn to add a new service after it found that many cancer patients were being readmitted through emergency departments. The response was an outpatient oncology evaluation unit, where patients can be seen as outpatients and effectively treated for common issues like dehydration.