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When he heard about Blue Cross Blue Shield of Massachusetts’ alternative payment program, Dr. Steven Strongwater, the CEO of Atrius Health, says he was delighted. The program promised cash bonuses for health care providers like his company to improve the quality of their care overall, while still saving everyone money.
“The big bet from Blue Cross Blue Shield was if you invest in better care and better quality, you would save money and that the total system would improve,” Strongwater says.
Their bet seems to be paying off, according to a study published Wednesday in the New England Journal of Medicine. Researchers followed hundreds of thousands of patients over eight years in the new payment program and compared them to similar patients who were not in the program.
“There was an 11.7% savings on medical claims on average over the first eight years when we compare against similar populations outside [of the program],” says Dr. Zirui Song, a health care policy researcher at Harvard Medical School and the lead author on the study.
And, he adds, “We see some evidence that patients were healthier in this program.”
The program, called the Alternative Quality Contract, works in two key ways. First, health care providers like Atrius Health, which joined in 2009, received bonuses to pay for upgrades at their medical practices like additional staff and improved electronic medical records.
“That allows us to invest in infrastructure and connect better with our patients and do a better job,” Strongwater says. “The goal [of that] is to keep patients healthier through prevention and early intervention.”
The idea, he says, is that healthier patients cost the system less overall.
The second part of the program changed how doctors, hospitals and other providers are paid. In a typical health payment system, providers receive payments for each service they perform, but Blue Cross Blue Shield’s new program uses a different system, known as a global payment model.
In this system, primary care providers receive a spending target from Blue Cross Blue Shield for their members’ care. If they spend less than the target amount by the end of the year, the providers and the health insurance company split the cash. If the doctors overspend, they and insurer split the extra cost.
The theory is that this will encourage physicians to take extra steps to avoid expensive care like emergency room visits and hospital stays.
“A lot of this is about whether patients receive recommended care and having some kind of care management for them,” says Andrew Ryan, a public health researcher at the University of Michigan who wasn’t involved in the study. “Physicians aren’t paid to do that under the typical system, but it’s really important for quality of care.”
In the Blue Cross Blue Shield program, physicians earn a bigger share of the leftover money or, if they overspend, shoulder a smaller portion of the extra costs, if they can show that the quality of their care is better. That creates an extra incentive for health care providers to find ways to deliver higher quality, lower cost care, Ryan says.
“Historically, physicians have been uninterested in the cost of care they provide,” he says. “It’s encouraging providers to provide what’s necessary and be more conscious about the value of the care they’re providing. It’s a very well designed program. It’s frankly exciting to see the success of this program.”
Over the first eight years, the study found, the first health providers to join the program saw average savings of nearly $500 per patient per year. Some of the early savings came through avoiding unnecessary medical services “like medical imaging for a headache or back pain,” Strongwater says, and shifting needed services from expensive hospital settings to cheaper, but still high quality, physician offices.
As the program continued, savings started to come through fewer patients showing up in emergency rooms, fewer prescriptions for drugs like antibiotics, and less use of medical imaging like CT or MRI scans. That, combined with the improvement of certain health metrics like high blood pressure, provides “some evidence patients were healthier,” Harvard’s Song says. And over time, the study found the savings from the program exceeded the bonuses paid to health providers.
“What the program allowed for us was to make investments in people, process and technology that, over time, allowed us to improve outcomes,” says Strongwater. And hopefully, he says, some of those savings will eventually be passed on to employers and individuals too, in the form of lower health insurance premiums.
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