The New England Journal of Medicine has published a study finding that Blue Cross and Blue Shield of Massachusetts’ (BCBS) global payment system, the Alternative Quality Contract (AQC), reduced costs in its first year of operation.  Beginning in 2009, BCBS began five-year AQCs with seven provider groups, which assumed spending accountability in return for the potential to receive quality and savings bonuses.  Examining claims data from 2006 to 2009 for participating provider groups and a control group of non-participating provider groups, the study found that costs did not increase as rapidly among participating organizations.  The authors found that savings were achieved through shifting outpatient care to facilities with lower fees, lowering expenditures for medical procedures, and lowering spending on enrollees with the highest expected spending.  In 2009, all participating groups met their budget targets and received savings bonuses.  However, the authors posit that future cost growth reduction under the AQC system will depend on budget targets and provider groups’ ability to further improve efficiency.

Song, Z., et. al.  (2011).  Health care spending and quality in year 1 of the alternative quality contract.  New England Journal of Medicine.  http://www.nejm.org/doi/full/10.1056/NEJMsa1101416#t=abstract

Authors: Zirui Song, Dana Gelb Safran, Bruce Landon, Yulei He, Randall Ellis, Robert Mechanic, Matthew Day and Michael Chernew.