Middle Ground

March 1, 2009

Payment structure among stakeholders must be equitable in order to avoid contract disputes and provide the highest quality of care to consumers.

"The patient is the ping-pong between the two," Knowlton says.

Conflicts between providers and payers often occur during contract negotiations. One such conflict occurred late last year in Greater Boston involving two high-profile stakeholders.

After an initial contracting battle between Blue Cross Blue Shield of Massachusetts (BCBSMA) and Tufts Medical Center, Tufts began notifying patients in early January that its doctors would no longer accept BCBSMA's coverage after January 31. Tufts asserted that the insurer was unwilling to pay what it considered "a reasonable rate," and therefore, Tufts could not afford to be part of its provider network.

The Boston Globe reported that BCBSMA reimbursed physicians 20% to 40% less than other major teaching hospitals in the area, even though the health plan itself had consistently ranked Tufts favorably among teaching hospitals in Massachusetts for quality of care. The potential split between one of Boston's most high-profile providers and one of the biggest insurers in the country would have affected 14,000 plan members, however, both sides did finally reach a new agreement on January 17-just days before the coverage change was scheduled to take effect.

Tufts signed BCBSMA's Alternative Quality Contract (AQC), the insurer's new payment model that aims to change the fundamentals of reimbursement through the emphasis of quality performance.

BCBSMA Executive Vice President Andrew Dreyfus believes the AQC is a fair and effective reimbursement tool because it combines adjusted global payment and pay for performance (P4P). The plan's AQC contract with Tufts-specific terms of which were not disclosed publicly-is evidence of the growing trend among payers to increase emphasis on partnership and accountability for quality in their provider business relationships.

Some industry experts say stakeholders should prepare for the opportunities among payers, providers and healthcare advocates who are collaborating now more than ever to develop effective quality programs in the marketplace. Health insurers have moved from exploring the concept of P4P to insisting on it in their contracting language. While providers might balk at some of the nuances, they are becoming more open to the idea of being paid under stipulations of quality.

The AQC is a five-year commitment that pays providers a global payment per-member, which increases annually in line with inflation, and is adjusted annually for age, gender, and health status. It covers all services received by a patient including primary, specialty and hospital care, as well as ancillary, behavioral health and pharmacy services.

But it's also different than traditional capitation because it combines adjusted global payment per-patient with performance payment, based on nationally accepted measures. The performance-based incentives can increase a provider's total payment by up to 10%.