Global Payment Effects

For several years Blue Cross of Massachusetts has offered what it calls an Alternative Quality Contract to provider groups.  An ongoing evaluation, which now covers the period through 2012, was published in the New England Journal of Medicine.   (NEJM Article)   The AQC program encourages accountable care organization like groups and pays them on a semi-shared risk basis.  A budget is set for health spending and any savings from spending below the budget are shared and the cost of health services above the budget is also shared.  The physician groups can also earn bonuses if they meet certain quality measures.  By 2012 , 85% of physician’s in the health plan’s network had entered into an AQC arrangement.  Earlier evaluations had found some reductions in spending, but they were smaller than the performance incentive payments, meaning there was no apparent overall reduction in spending.  This analysis looked at performance for subgroups of providers who first entered into the AQC in 2009, 2010, 2011 or 2012, and compared spending and quality performance to that for providers in employer-sponsored health plans in eight other northeastern states.  For the 2009 cohort of providers, there was an average annual saving of around $250 per enrollee compared to spending in the control group, on an adjusted basis.  The savings were concentrated in less use of imaging, lab tests and outpatient facility charges.  About 40% of savings appeared to be due to drops in utilization, with the rest accounted for by lower prices.  The 2010, 2011 and 2012 cohorts showed savings as well, in the same general range as the 2009 group, and again, most of the decrease in spending was attributable to use of lower priced services.  When incentive payments are taken into account, by 2012, there was a small net savings.  It should be noted, however, that it is unclear that this accounts for all the costs providers incur to participate, but from a payer perspective, total health care spending appears lower.  Similarly, there was a consistent, but small improvement in performance on quality measures, both within the participating providers and compared to the control groups.  While the results are encouraging, they also don’t represent any real breakthrough in dramatically reducing health spending.  As provider groups become more consolidated and pent-up demand for higher income increases, we will see if market power is used to demand higher “budgets”.