Spending and Quality in First Year of the Alternative Quality Contract

In January 2009, Blue Cross Blue Shield (BCBS) of Massachusetts implemented the Alternative Quality Contract (AQC) payment system. Based on global payment and pay for performance, AQC was implemented in response to continued growth in healthcare spending following healthcare reform in the state. AQC is similar to the 2-sided model for accountable care organizations (ACOs) identified by the Centers for Medicare & Medicaid Services in the regulations proposed for ACOs. Global payment is receiving attention as an alternative to fee for service because it creates a greater opportunity to control total spending, according to researchers. Members of a Massachusetts state commission voted in July 2009 to support a 5-year plan to move the state to global payment. Providers in a global payment model share in savings if spending is below the prespecified budget; likewise, they are also accountable for deficits if spending exceeds the budgeted amount. This risk acts as an incentive for controlling spending. The AQC model was implemented in the Massachusetts BCBS health maintenance organization (HMO) and point-of-service enrollee populations because those models require enrollees to designate a primary care physician (PCP); AQC does not extend to populations in preferred-provider organizations because beneficiaries do not have to designate a PCP. When a provider organization becomes part of the AQC, only those patients enrolled in its HMO or point-of-service programs are included in the contract. There are 3 features that distinguish AQCs from fee-for-service contracts and from capitation contracts: (1) physician groups enter into 5-year global budget contracts (as opposed to 1-year contracts); (2) AQC groups are eligible for pay-for-performance bonuses up to 10% of their budget (performance measures of ambulatory care and hospital care contribute to half of the calculation of the bonus); and (3) AQC groups receive technical support from BCBS, including reports on spending, utilization, and quality to help the group manage its budget and improve quality. In 2009, 7 provider organizations began 5-year contracts as part of the AQC system in Massachusetts. Researchers recently conducted an analysis to determine the effect of the AQC system on healthcare spending and on measures of the quality of ambulatory care in 2009. They reported study results online in the New England Journal of Medicine [10.1056/NEJMsa1101416]. The study cohorts included enrollees in BCBS from January 2006 through December 2009. The researchers analyzed claims data from 380,142 enrollees in the intervention group (those whose PCPs were in the AQC system) and 1,351,446 enrollees in the control group (those whose PCPs were not in the system). Analysis results demonstrated that healthcare spending increased for both groups in 2009; however, the increase was smaller for those in the intervention group compared with those in the control group. The increase in the intervention group was $15.51 less per quarter relative to the increase for those in the control group (95% confidence interval, –27.21 to –3.81) in average quarterly spending per enrollee in 2009, a 1.9% savings relative to the control group (P=.007). The researchers determined that the savings resulted primarily from shifts in outpatient care toward less expensive facilities; lower expenditures for procedures, imaging, and testing; and reduction in spending in enrollees with the highest expected spending. The analysis also revealed improvement in performance on measures of quality of management of chronic conditions in adults (P<.001) and of pediatric care (P<.001) in the AQC group compared with the control group. However, there was no improvement in performance on measures of the quality of adult preventive care. All AQC groups met 2009 budget targets and received surpluses. In conclusion, the researchers summarized that the “AQC system was associated with a modest showing of spending growth and improved quality of care in 2009. Savings were achieved through changes in referral patterns rather than through changes in utilization. The long-term effect of the AQC system on spending growth depends on future budget targets and providers’ ability to further improve efficiencies in practice.”