Durable solutions

April 1, 2011

Blue Cross Blue Shield of Massachusetts has seen a rapid uptake of its new quality-based reimbursement structure

In 2009, Andrew Dreyfus told MANAGED HEALTHCARE EXECUTIVE he anticipated that 15% to 20% of providers contracting with Blue Cross Blue Shield of Massachusetts (BCBSMA) would adopt its new quality-based reimbursement structure in the coming years. His estimate has turned out to be quite accurate.

So far, BCBSMA has signed up more than one-third of its HMO providers under the emerging Alternative Quality Contract (AQC), delivering care for 405,000 members. In all, the plan covers 3 million people and is the largest insurer in the state.

Most industry leaders have heard a thing or two about the AQC: The five-year contract combines monthly per-member payment with various levels of bonus payment for meeting quality benchmarks. Some might call it risk-adjusted capitation reinforced with pay for performance.

"The market was really looking for more durable solutions around affordability," says Dreyfus, president and CEO of BCBSMA, in his office in Boston. "Just at that time, we had the only model that improved care and reduced the rate of growth. The state payment-reform commission, policy experts and purchasers were suddenly really interested in it. Simultaneous to that, we started to send letters to hospitals and physicians saying explicitly that we couldn't allow fee-for-service fees to grow at the level they had in the past, which in Massachusetts, was often 4% to 6% per year."

Likewise, BCBSMA itself saw medical spending grow an average of 10% to 12% between 2008 and 2009, just prior to the AQC launch. Dreyfus wants to see those figures reduced to a 5% to 6% range by the end of the first five years of the AQC contracts.

Adoption is still growing, and the plan has charted some encouraging first-year results.

According to Dreyfus, providers who initially turned down the AQC have now come back to sign up because of rising pressure to adopt quality-based models.

"It was a tough sell broadly to the physician hospital community of Massachusetts because they had such a bad experience with capitation and with other payment experiments," he says. "They were appropriately skeptical."

Early adopters included the practices that fared well under capitation arrangements and those that believed the status quo of fee for service was quickly going away. Dreyfus says the early adopters were philosophically aligned with BCBSMA's pursuit of clinical quality.

The AQC is a hybrid of certain aspects of fixed-budget or capitation models and the best practices among pay-for-performance programs. Providers' budgeted global payments are adjusted annually for health status and inflation, while cost control is focused on future growth rates.

For example, Northeast Health Systems Physician Hospital Organization has placed case managers in primary care practices to manage high-risk patients and help avoid costly admissions and emergency room visits. The organization earns bonus cash for delivering on that quality metric.

First-year AQC participants collectively reduced hospital readmissions equal to $1.8 million in avoided costs, while traditionally contracted groups experienced an increase in readmissions over the same time period, according to BCBSMA data. Chronic care management, preventive screenings and ambulatory quality scores also showed higher increases for the AQC groups. For example, chronic care management quality scores increased by 2.1 points on a five-point scale for AQC groups, while the remaining providers showed just a 0.2 increase in those quality scores.

"The AQC is designed with the twin goals to improve quality and outcomes while slowing the rate of growth in healthcare spending," says Dana Safran, senior vice president, performance management and improvement, BCBSMA.

The hybrid model is meant to address a number of nagging concerns: