Alternative Payment Model Lowers Medical Spending, Improves Care

A global budget program, an alternative to traditonal fee-for-service reimbursement models, can lower the costs of medical spending and improve care quality for patients, according to a study from Harvard Medical School’s Department of Health Care Policy.

The study, culled from the first two years of claims data from Blue Cross Blue Shield of Massachusetts (BCBSMA) Alternative Quality Contract (AQC), found that the 11 healthcare provider groups participating in the AQC spent 1.9 percent less than FFS groups in the first year, and 3.3 percent less in the second year.

The AQC is similar to the Pioneer ACO contracts in which Medicare rewards groups of providers based on improved outcomes and lower healthcare spending, in an attempt to move away from FFS models.

For both years, reduced spending was attributed to changing referral patterns: physicians were referring patients to lower-cost facilities. For the second year, researchers cited lower utilization of medical services as responsible for the savings. Quality of care improvements were also greater in the second year than in the first.

Provider groups who came from a FFS contract model spent 9.9 percent less in the second year, up from 6.3 percent in the first year.

Compared to both these groups, providers that entered from similar AQC-type models achieved fewer savings in both years.

For all groups associated with the AQC in the second year, research showed improvements in quality of chronic care management, adult preventive care and pediatric care.

BCBSMA first launched the AQC in 2009. In addition to the global budget, groups were also eligible for bonuses if they met certain quality or financial targets, as well as responsible for spending over the budget.

While the study showed that the AQC reduced spending, it did not reduce the costs to BCBSMA spending, due to incentives doled out for lower spending and improved quality. Researchers stressed this wasn’t a weakness of the program. “The intent of the AQC was to achieve savings over the five-year duration of the contract,” said lead study author Michael Chernew. “It was not designed to reduce BCBSMA spending in the first two years.”

Source: Aligning Physician Incentives for Shared Risk and Reward Across the Healthcare Continuum
Aligning Physician Incentives for Shared Risk and Reward Across the Healthcare Continuum
In Aligning Physician Incentives for Shared Risk and Reward Across the Healthcare Continuum, Babette Apland, senior vice president of health and care management for HealthPartners, shares how HealthPartners aligned physician incentives and shared savings with pay-for-performance programs and a total cost of care initiative.

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