Blue calculated and compared to the ascertained

Blue Cross Blue Shield (BCBS) of
Massachusetts (BCBSM), a private insurance provider, launched the Alternative
Quality Contract (AQC) in 2009. Originally encouraged by the Affordable Care
Act (ACA) and beginning with 7 participating provider organizations, the goal
of the AQC was to improve quality, lower costs, and slow the exponential growth
of healthcare spending.1

As of now, the AQC only covers BCBS Health
Maintenance Organization (HMO) patients and Point-of-Service enrollees. Provider
organizations who give primary care for at least 5,000 enrollees in the BCBSM
HMO or POS plans can enter into this voluntary 5-year contracts as “AQC groups”.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

AQC groups decide an annual budget for their attributed patients which includes
all health care costs the patient will receive that year. The budget varies per
group and is initially based on attributed patients’ prior total healthcare costs.

After the first year, the budget is adjusted for patients’ health status and
inflation, again varying by group. Providers receive fee-for-service payments
(FFS), as in a traditional healthcare model, however, at the end of the year, total
fees are calculated and compared to the ascertained target. If total spending
is below budget, the group can receive a shared savings payment from the insurer.

However, if spending is above target, since this is a shared-risk model, the
AQC must pay BCBSM a share of the overdraft. During the first two years, AQC
groups can choose to take on 50-100% up-side or down-side risk and are eligible
for an additional 10% of their total spending target if certain quality
measures were met. In year three, the shares of savings and losses is
determined based on previous performance on quality measures where high
performance allows for a greater share in savings and a smaller share of risk; the
10% bonus is removed in year three. Sixty-four quality measures (QM) are in
place as a complimentary performance metric to spending.  These QMs adjust the size of shared savings or
penalties owed. Thus, quality cannot suffer at the expense of cost.1

For a patient, by designating a
primary care provider (PCP) who is a part of the ACQ, a patient’s care becomes
attributed to that physician’s budget. Enrollee participation is not voluntary
or decided by them; in fact, BCBS members are not told if their PCP is even enrolled
in the AQC. However, their benefits should remain identical to those of other
patients in an HMO or POS – able to receive care from any in-network providers
if referred. This is could be classified as a “commercial HMO” model.1

In agreeance with the ACA, the AQC
has met its goals of cost reduction without sacrificing quality. It is now one
of the largest private payment reform initiatives in the U.S with 90% of
physicians in BCBSM’s HMO network participating. However, the plan has had
far-reaching impacts that have affected multiple stakeholders differently. What
follows is an analysis of how the AQC has affected the cost and quality of services
as they pertain to patient-consumers, AQC physicians and AQC hospitals. Spill-over
effects on CMS, a different payer population, will also be examined.

The effect on providers has been
varied due to the diversity of participating groups, but the LA Times captured the sentiment well in
an interview with a participating physician: “That kind of attention has always
been good medicine. For Dr. Folch, 59, it’s now good business.”3 (page 2)
The quote above comes from an AQC PCP office in suburban Boston that will not
let a patient with high cholesterol leave the office without a scheduled eye
exam which is key prevention. To review, providers were given an annual budget
based on attributed patient’s historical per member per month spending with
bonuses the first two year for meeting quality metrics. BCBSM provides regular
reports on quality, service use and spending. Some participating groups are
experienced due to previous contracts with global-risk whereas others are new
to this arrangement. Regarding both cost and quality, AQC groups prioritize
quality improvement so as to increase financial returns. Furthermore, because
targets for quality measures are absolute numbers, rather than a relative
ranking compared to peers, providers face no disincentive to share best
practices with each other. A 2006 review of 27 FFS programs saw the average
physician performance bonuses were only 2.3% of their total payments whereas
the AQC offers up to 10% of total spending. Since groups can direct the bonuses
within their provider network, they can specifically incentivize physicians.

For example, because PCP salaries represent less than 10% of total spending,
groups that received a full bonus for ambulatory care quality measure (half of
the 64 measures, thus 5% of the total 10% bonus) could then increase PCP
compensation by greater than 50% above their existing BCBS fee schedule. This
offers a competitive advantage for groups that receive lower rates from BCBS
and thus have relatively lower physician salaries. These groups are at risk of
losing physicians to organizations on the higher end of the fee scale, however
participation in the AQC gave them an opportunity to attract physicians with
pay. Physicians were given the opportunity to improve quality in real-time with
regular feedback on quality scores and data on specific patient follow-up
mishaps such as chronic and preventative care services as well as assistance in
contacting patients. BCBS pay some groups up to 2% of their annual budget to
promote infrastructure development. Along with linking physician compensation
to performance, referral management was among the largest changes for
physicians. Groups tried to control for “leakage” or the percentage of patients
referred outside of the group’s network and directing patients to less
expensive care facilities. Some groups even considered expanding their in-house
specialists to expedite referrals. In terms of ambulatory care quality measures,
after two years the contract correlated with a 3.7% increase per member per
year among participating members. In a NEJM study comparing 4-year AQC results
from 2009-2012 to those among persons in control states, Song et al. found that
medical spending on claims grew an average of $62.21 less per enrollee per
quarter than it did in a control cohort. The 2009 medical spending average for
groups in the AQC did increase, it rose by 2% less than average spending for
BCBS HMO enrollees with providers not in the contract. Not surprisingly the
strongest performance was accomplished by groups new to global-risk and thus
had the most changes to make; these groups medical spending increased by 6.3%
less than the average of non-AQC groups. Most savings came from the change in referral
patterns where there was a shift to providers with lower outpatient facility
fees.2,3,4

                  As
for patients, the recipients of care, enrollee cost-sharing is not affected by
the AQC or if their provider is in an AQC group. Therefore, enrollees do not
have financial disincentives to see providers outside of the AQC. However, since
as discussed above, PCPs may be incentivized to direct referrals in-house or to
lower-cost facilities, possibly causing friction between patients and their
primary providers. Patients are able to switch PCPs at any time and are not
locked in to provider in the network. In terms of quality, since a key part of
the AQC is linking quality metrics to savings, patients are now tracked to get
the right screening exams, if they are satisfied with their care, and if they
get the right drugs and so on. This model penalizes physicians who withhold
care in the interest of cost-savings. Patients seen by groups in the AQC were
hospitalized less and used fewer expensive services like imaging with no
evidence that reduced utilization compromises the quality of care. The AQC made
strides in quality when it came to coordinating care for high-risk enrollees:
those with multiple chronic diseases who are at highest risk for rapid
deterioration and thus costly hospitalization. Patient-care improved with
multidisciplinary approaches to coordinating care, using programs like
StatusOne and Guided Care. To reduce avoidable hospital admissions and
readmissions and emergency visits, one group contacted all patients who were
discharged from the hospital to ensure they understood their instructions, were
compliant with medications, and had access to support services and were not
experiencing any complications. On a composite of 5 Health Effective Data and Information
Set (HEDIS) measures for Diabetes and Cardiovascular disease, the 2009 AQC
improved health outcomes 12% above the HEDIS national average. An interesting
study in Health Affairs 2017 by Song et al. found that while quality improved
for all enrollees whose providers were a part of the AQC, process measures
improved 1.2% per year more for enrollees in areas with lower socioeconomic
status (SES) as when compared to patients of high SES. There were no differences
in outcomes between groups or spending. This suggests that the AQC is
unintentionally narrowing disparities among patients. Providers may be
incentivized to focus on improving quality for historically medically-neglected
populations as they bear the most potential for quality improvement sand savings.

However, in a 2015 report by Avalere, it was found that quality metrics did not
improve on measures not tied to payment, unfortunately demonstrating the need
for incentives.