Robert E. Mechanic

The ‘Alternative Quality Contract,’ Based On A Global Budget, Lowered Medical Spending And Improved Quality

Seven provider organizations in Massachusetts entered the Blue Cross Blue Shield Alternative Quality Contract in 2009, followed by four more organizations in 2010. This contract, based on a global budget and pay-for-performance for achieving certain quality benchmarks, places providers at risk for excessive spending and rewards them for quality, similar to the new Pioneer Accountable Care Organizations in Medicare. We analyzed changes in spending and quality associated with the Alternative Quality Contract and found that the rate of increase in spending slowed compared to control groups, more so in the second year than in the first. Overall, participation in the contract over two years led to savings of 2.8 percent (1.9 percent in year 1 and 3.3 percent in year 2) compared to spending in nonparticipating groups. Savings were accounted for by lower prices achieved through shifting procedures, imaging, and tests to facilities with lower fees, as well as reduced utilization among some groups. Quality of care also improved compared to control organizations, with chronic care management, adult preventive care, and pediatric care within the contracting groups improving more in year 2 than in year 1. These results suggest that global budgets with pay-for-performance can begin to slow underlying growth in medical spending while improving quality of care.

Private-Payer Innovation In Massachusetts: The ‘Alternative Quality Contract’

In January 2009 Blue Cross Blue Shield of Massachusetts launched a new payment arrangement called the Alternative Quality Contract. The contract stipulates a modified global payment (fixed payments for the care of a patient during a specified time period) arrangement. The model differs from past models of fixed payments or capitation because it explicitly connects payments to achieving quality goals and defines the rate of increase for each contract groups budget over a five-year period, unlike typical annual contracts. All groups participating in the Alternative Quality Contract earned significant quality bonuses in the first year. This arrangement exemplifies the type of experimentation encouraged by the Affordable Care Act. We describe this unique contract and show how it surmounts hurdles previously encountered with other global-payment models.

Payment Reform Options: Episode Payment Is A Good Place To Start

New strategies to control U.S. health spending growth are urgently needed. Although provider payment cuts are likely, cutting fee-for-service (FFS) payments will hurt quality and access. A more sensible approach would be to restructure the delivery system into organized networks of providers delivering reliable, evidence-based care. But restructuring will not occur without payment policy reform. Four policy options are commonly cited: recalibrating FFS, instituting pay-for-performance, creating episode-based payments, and adopting global payments. We argue that episode payments are the most immediately viable approach, and we recommend that payment reforms precede any payment reductions so that new delivery models can gain traction.

Post-Acute Care — The Next Frontier for Controlling Medicare Spending

Acute care providers have had little financial incentive to ensure effective transitions to post-acute care or support post–acute care providers when discharged patients have complications. Medicares bundled-payment and shared-savings programs should help change that.

Opportunities and challenges for episode-based payment.

Episode-based payment, one of the payment reforms in the Affordable Care Act, aims to create incentives for efficiency and better care coordination. But its more complex to administer than fee for service or capitation and faces substantial implementation challenges.

Mandatory Medicare Bundled Payment--Is It Ready for Prime Time?

The Centers for Medicare and Medicaid Services has proposed a Comprehensive Care for Joint Replacement program that would bundle payments for total hip and knee replacements, covering care through 90 days after discharge — and hospitals would be required to participate.

Lessons Learned Preparing for Medicare Bundled Payments

Medicare typically spends as much or more in the 90 days after discharge as it does for the initial hospitalization, and post-acute care spending varies widely. This variation highlights opportunities for bundled payments to help improve quality and reduce spending.

Medical Group Responses To Global Payment: Early Lessons From The ‘Alternative Quality Contract’ In Massachusetts

The largest insurer in Massachusetts, Blue Cross Blue Shield, began a new program in 2009 that combines global payments-fixed payments for the care of patient populations during a specified time period-with large potential quality bonuses for medical groups. In interviews with representatives of the participating medical groups, many of which could be considered prototype accountable care organizations, we found that most groups initially focused on two goals: building the infrastructure to help primary care providers earn quality bonuses; and managing referrals to direct patients to lower-cost settings. Groups are working to overcome numerous challenges, which include improving their data management capabilities; managing conflicting incentives in their fee-for-service contracts; and establishing cultures that emphasize teamwork, patient-centered care, and effective stewardship of medical resources. The participating medical groups are diverse in terms of size, organizational structure, and prior experience with managed care contracting. If the groups can succeed in reducing annual growth in health spending by half over the five-year contract, it could signal that even newly formed accountable care organizations can navigate a shift from fee-for-service to population-based payment models.

Medicare's Opportunity to Encourage Innovation in Health Care Delivery

Congressional reform proposals include a new Center for Medicare and Medicaid Innovation intended to facilitate beneficial delivery-system changes. Robert Mechanic and Stuart Altman write that the long-term effect on the U.S. health care system could be priceless.

The Early Impact Of The ‘Alternative Quality Contract’ On Mental Health Service Use And Spending In Massachusetts

Accountable care using global payment with performance bonuses has shown promise in controlling spending growth and improving care. This study examined how an early model, the Alternative Quality Contract (AQC) established in 2009 by Blue Cross Blue Shield of Massachusetts (BCBSMA), has affected care for mental illness. We compared spending and use for enrollees in AQC organizations that did and did not accept financial risk for mental health with enrollees not participating in the contract. Compared with BCBSMA enrollees in organizations not participating in the AQC, we found that enrollees in participating organizations were slightly less likely to use mental health services and, among mental health services users, small declines were detected in total health care spending, but no change was found in mental health spending. The declines in probability of use of mental health services and in total health spending among mental health service users attributable to the AQC were concentrated among enrollees in organizations that accepted financial risk for behavioral health. Interviews with AQC organization leaders suggested that the contractual arrangements did not meaningfully affect mental health care delivery in the programs initial years, but organizations are now at varying stages of efforts to improve mental health integration.