The 'Alternative Quality Contract,' based on a global budget, lowered medical spending and improved quality

Abstract

Seven provider organizations in Massachusetts entered the Blue Cross Blue Shield Alternative Quality Contract in 2009, followed by four more organizations in 2010. This contract, based on a global budget and pay-for-performance for achieving certain quality benchmarks, places providers at risk for excessive spending and rewards them for quality, similar to the new Pioneer Accountable Care Organizations in Medicare. We analyzed changes in spending and quality associated with the Alternative Quality Contract and found that the rate of increase in spending slowed compared to control groups, more so in the second year than in the first. Overall, participation in the contract over two years led to savings of 2.8 percent (1.9 percent in year 1 and 3.3 percent in year 2) compared to spending in nonparticipating groups. Savings were accounted for by lower prices achieved through shifting procedures, imaging, and tests to facilities with lower fees, as well as reduced utilization among some groups. Quality of care also improved compared to control organizations, with chronic care management, adult preventive care, and pediatric care within the contracting groups improving more in year 2 than in year 1. These results suggest that global budgets with pay-for-performance can begin to slow underlying growth in medical spending while improving quality of care.

Exhibit 3

Estimated Year 1 And Year 2 Effects Of The Alternative Quality Contract (AQC) On Spending In The 2009 And 2010 Cohorts’ No-Prior-Risk Groups, Blue Cross Blue Shield Of Massachusetts Source/Notes: SOURCE Authors’ analysis of 2006–10 claims data from Blue Cross Blue Shield of Massachusetts. NOTES Exhibit 3 shows difference-in-differences estimates of the separate year 1 and year 2 effects of the AQC on health care spending per member per quarter. For descriptions of the 2009 and 2010 cohorts, see the text.