Global payment pilot yields savings

Analysis of the Mass. project also shows changes in doctor behavior

BOSTON  -  In 2009, Blue Cross Blue Shield of Massachusetts (BCBS) launched the Alternative Quality Contract (AQC), a global payment reimbursement pilot program that rewards participating physician groups for controlling spending and improving quality of care. A Commonwealth Fund-sponsored analysis of the first two years of the five-year pilot has found that such programs may be effective at controlling healthcare spending and improving quality. 

Over the course of its first two years, the global payment pilot has achieved an average savings of 2.8 percent  -  1.9 percent in the first year and 3.3 percent in the second, found the project evaluators.

The Commonwealth Fund is supporting a multiyear study of the model. Evaluators are contrasting the spending and savings of AQC groups and nonparticipant organizations throughout the state. Eleven physician groups comprising 1,600 primary care physicians and 3,200 specialists are participating.

"We do see that there are cost savings compared to a reasonably constructed control group," said Bruce Landon, MD, an author of the study, associate professor of healthcare policy at Harvard Medical School and associate professor of medicine at the Beth Israel Deaconess Medical Center (BIDMC). 

These results indicate spending shifts in the areas of price and quantity, he said. "More importantly, we're seeing this in the context of maintained or improved quality. All the quality metrics that we're looking at in the contract are either as good or better than they were beforehand."

The savings are perhaps more weighty as symptoms of what's to come than they are for their fiscal value, said Zirui Song, PhD, a student at Harvard Medical School and fellow at the National Bureau of Economic Research in Cambridge, who was the lead author of the study. 

"Perhaps the most meaningful result from the study is behavior change by physicians in response to the contract's incentives," he said. That finding is two-fold, he said. He and his study colleagues found AQC participants reduced their increase in total spending by their patients and improved their quality of care for chronic diseases, adult preventive care and pediatric care relative to providers not in the AQC. 

Landon and Song agree that the AQC is an appropriate step towards necessary change because it shifts the fee-for-service foundation of the care industry into something more sustainable. 

"In the years prior to the AQC, the growth of healthcare spending had consistently exceeded general inflation," explained Song. So though the AQC model requires upfront costs in order to be palatable to physicians (and in this case, those costs have exceeded the savings outlined in the Commonwealth Fund study) it's generating viable movement forward. 

Participating physicians have recognized this as well, though this movement doesn't come without some apprehension. 

"It is stressful," said Thomas Lee, MD, who is the network president for Partners Healthcare System, and a professor in the Department of Health Policy and Management at Harvard Medical School. "It does require a re-orientation from trying to do an excellent job with the patient in front of you, trying to 'produce' visits and operations and test in an excellent and efficient way, from managing care over time and managing a population."

Partners Healthcare System enrolled in the AQC on January 1 of this year. Its first-year savings are expected to hover close to $80 million. Lee predicts these savings will be generated by the reduction of unit costs, which a global budget demands. 

At Lee's organization, acquisition of the AQC has demanded teamwork and trust. "We're having a lot of evening meetings, a lot of 7 a.m. meetings," he said, "but in the long run we know that this is the right thing to do."

Global payment is not perfect and it has generated some trepidation, said Richard Parker, MD, medical director of the Beth Israel Deaconess Physician Organization (BIDPO), another of the groups participating in the pilot. However, he said, physicians generally recognize the perversity of fee-for-service and most believe now "that global payment methodologies really are here to stay, and we might as well learn to work with them."

Indeed, the AQC heralds the beginning of Massachusetts' path to complete payment reform, said Song. As the study indicates, savings have been realized in the contract's first two years, but as physician behavior continues to change, and global models grow increasingly more palatable to transitioning groups, there's potential for greater, long-run success. 

"It's helped guide the healthcare delivery system here in Massachusetts towards improved incentives for containing spending and improving quality," said Song. "But literally much remains to be seen in the years ahead."

Landon expects these AQC-induced changes to accumulate over time. "... (T)hey're probably going to accelerate as we have more experience," he said. "What I think (everyone) needs to understand is that turning around the delivery system is more like turning an aircraft carrier than it is like turning a speedboat."

The act of this turning, though, is powerful in itself. "There's a broad realization, even among physicians, that what's going on now is unsustainable," said Landon, "and that there's another shoe that's going to drop at some point. The AQC really presents a powerful opportunity for physicians."