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BCBS of Massachusetts' global payment system lowers medical spending

Findings from a Harvard University study reported in the New England Journal of Medicine examining one-year results for Blue Cross Blue Shield of Massachusetts' global payment initiative shows the program is lowering medical spending while improving quality of care.

The Alternative Quality Contract (AQC), which replaced traditional fee-for-service payment just completed the first year of the five-year program. Providers participating in the AQC are paid a comprehensive, global payment covering the entire spectrum of patient care, including inpatient, outpatient, rehabilitation, long-term care and prescription drugs. In addition, they are eligible for a performance bonus for meeting specific quality targets.

[See also: Creative payment reform initiatives abound nationwide; Global payment system on the horizon nationally, expert says]

The study, led by Zirui Song of the Department of Health Care Policy, Harvard Medical School, found that because of the structure of payments AQC physicians changed their referral patterns resulting in more patients referred to physicians with lower fees.

"Changes in referral patterns can subsequently affect pricing in the healthcare market, as high-price facilities feel pressure from decreased volume," the report authors noted.

To determine the affects of the program on both pricing and quality, the authors analyzed claims from 2006 to 2009 for 380,142 Blue Cross Blue Shield of Massachusetts enrollees whose primary care physicians were in the ACQ system. The control group consisted of 1,351,446 enrollees whose primary care physicians were not in the ACQ system. The researchers evaluated the effect of the AQC system on healthcare spending and on measures of ambulatory care quality.

After one year of AQC operation, the researchers found:

  • Healthcare spending increased for both ACQ and non-AQC enrollees. However, the quarterly increase was smaller for AQC enrollees – $15.51 less per enrollee.
  • Medical procedures, imaging and testing accounted for more than 80 percent of the savings. Care utilization rates were not significantly different, however, leading researchers to conclude that the savings derived largely from shifting outpatient care to providers that charged lower fees.
  • The AQC was associated with improved performance on measures of the quality of adult chronic care and pediatric care, but not of adult preventive care. Quality improvements were likely due to a combination of substantial financial incentives and data support from Blue Cross Blue Shield.
  • All AQC groups met 2009 budget targets and were eligible to share in the savings that accrued.

"The improvements in quality and patient health outcomes achieved by each and every AQC organization were remarkable in the first year of these multi-year contracts. These results demonstrate that by aligning payment incentives with accountability for important quality and outcome measures, significant improvements in patient care can be accomplished," said Dana Safran, ScD., BCBSMA's senior vice president, performance measurement and improvement earlier this year when BCBSMA released preliminary results of the AQC program.