Eight Years Experience With an Alternative Reimbursement Method

Last week we reviewed a new provider contract and reimbursement method for Blue Cross in Hawaii, and noted that one year wasn’t long enough to evaluate anything.  This week we have research in the New England Journal of Medicine about a similar contract method that has been used in Massachusetts by the Blue Cross plan for over eight years.  That gives a much better picture of the effect on outcomes.   (NEJM Article)   The AQC began in Massachusetts in 2009 and by 2013 about 85% of the plan’s members and providers were covered by the contract method.  The authors looked at claims from 2006 to 2016. They created a control group of members covered by employer plans in other northeastern states.  Primary outcomes were total spending, net spending after incentive payments, utilization and certain quality outcomes focused on chronic disease, adult preventive care and pediatric care.  The analyses were adjusted by health status and other factors to ensure comparability.  Trends before and after introduction of the contract were analyzed.

For the 2009 cohort of AQC members, for the eight-year study period, the increase in average annual medical spending was $461 lower than in the control group, a savings of about 12%.  The savings were greatest for those enrollees who were covered by the AQC longest.  Similar savings were seen for the 2010 cohort of AQC enrollees, with lower savings in the 2011 and 2012 cohorts, consistent with the finding that longer time under the contract resulted in greater savings.  Savings appeared concentrated in outpatient hospital facility spending, with less use of the ER and some kinds of testing as well.  About 70% of the savings related to utilization differences and the remainder was attributed to price differences, including referrals to lower-cost providers.  While savings were exceeded by incentive payments in the early years of the AQC, by later years there were net savings for the plan, and again, those net savings were higher for enrollees with longer duration under the AQC.  Performance on quality measures improved significantly, and improved faster than in the control groups.  While not humongous, the improvements seen under this method of contracting with and reimbursing providers contribute to moderating the rate of health spending growth and likely have improved the health of enrollees.