Early evidence is that the AQC arrangement encourages providers to more carefully  utilize ancillary services, including clinical laboratory and pathology testing

Much attention is being given to the new healthcare payment models being introduced by the Medicare program during 2012. However, quietly—and with much less publicity—private health plans are deploying innovative, value-based payment models.

These developments need to be watched by clinical laboratory managers and pathologists, since it is predicted that the cost of medical laboratory testing will be bundled into most of the value-based reimbursement arrangements soon to enter the healthcare marketplace.

One new payment model gaining momentum is the Alternative Quality Contract (AQC) model. In Massachusetts—home to one of the nation’s most controversial state-sponsored health reform initiatives—two important players launched an AQC as of January 1, 2012. Their mutual goal is to use the alternative quality contract to improve care and slow healthcare spending.

Early data from the Alternative Quality Care (AQC) healthcare delivery model indicates that patient outcomes can be improved while the overall increase in spending moderates. This table is from a study of AQCs published by the New England Journal of Medicine (NEJM) in July 2011. (Graphic by New England Journal of Medicine)

Early data from the Alternative Quality Care (AQC) healthcare delivery model indicates that patient outcomes can be improved while the overall increase in spending moderates. This table is from a study of AQCs published by the New England Journal of Medicine (NEJM) in July 2011. (Graphic by New England Journal of Medicine)

On the provider side of this arrangement is Partners HealthCare. The payer is Blue Cross Blue Shield of Massachusetts (BCBSMA).

In its story about this innovative contract, Healthcare Finance News  stated that Partners HealthCare is the largest provider so far to participate in this new AQC payment model. Partners’ three-year contract with BCBSMA will cover more than 200,000 members. What is noteworthy about this arrangement is that the two organizations expect total health costs savings of roughly $80 million annually over the next three years!

“Our goal is to manage utilization and costs and create savings for our patients,” declared Gary Gottlieb, M.D., M.B.A., President and CEO of Partners. His organization has more than 50,000 employees. That includes 1,300 primary care physicians and more than 6,000 specialists. It is the largest private employer in Massachusetts.

AQC Is Shared Risk, Shared Savings Payment Model

Alternative quality care is a shared savings, shared risk payment model. It pays providers a fixed per-patient payment. There can be significant payment incentives to providers which are tied to improved quality, effectiveness and experience of the care patients receive.

The BCBSMA deal comes as Partners launched its own internal program with the goal of saving more than $300 million—or about 5%—in total costs over the next three years, the News article reported.

There are high expectations for the Alternative Quality Contract payment model. In July 2011, the New England Journal of Medicine (NEJM) published a study showing how the new model slowed cost growth. Spending was 2% lower for AQC providers than their peers in the traditional fee-for-service model, the authors wrote. Further, the results also showed that spending was 6% lower for providers new to a global payment model.

“[G]lobal payment has the greatest potential for encouraging shifts in healthcare resource use from low-value to high-value services,” observed Stuart Altman, PhD., Professor of Health Policy at Brandeis University Heller School for Social Policy and Management. He was quoted in a white paper on the BCBSMA website.

Quality Measures, Performance Data Contribute to Success of AQC Model

According to the white paper, the AQC’s success is attributable to four primary factors:

  1. The quality measures contained in the AQC contract are nationally accepted as clinically appropriate so there is wide support for improving performance on these indicators.
  2. Real dollars are at stake for improvement.
  3. Performance data is made available regularly which enables provider organizations participating in the AQC to track progress and take action to better manage their patients’ health.
  4. The participating provider groups have strong support from their leadership to implement new systems and act on the data.

“Our new approach to payment was designed to address the twin goals of improving the quality and outcomes of patient care while significantly cutting the rate of growth in health care spending,” noted Andrew Dreyfus, President and Chief Executive Officer of Blue Cross Blue Shield of Massachusetts, in his company’s press release. “After reviewing the first-year results of these multi-year contracts, I am pleased that we are making significant progress toward both goals.”

Results of the study showed that average spending increased for both groups. However, the increase was smaller for the AQC group, at $15.51 less per quarter. The savings derived largely from three areas:

  • Shifts in outpatient care toward facilities with lower fees;
  • Lower expenditures for procedures, imaging, and testing; and,
  • Reduction in spending for enrollees with the highest expected spending.

The study showed slowing of spending growth and improved quality of care in 2009 for the AQC group. Savings were achieved through changes in referral patterns rather than through changes in utilization, the authors noted. “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,” the authors stated.

“By joining the Alternative Quality Contract, Partners has committed to work with us in a deeper, more collaborative way to lower the cost and improve the quality of the care they deliver to our members,” Dreyfus commented in the press release. “Our new payment model is a crucial component of our company’s agenda to make quality health care affordable for our members and employer customers. This alternative payment model fosters shared responsibility for both improving care and moderating the unsustainable rate of increase in health care costs.”

The BCBSMA white paper noted that, based on the year one results, the AQC shows significant promise for contributing reforms to healthcare delivery systems that will lead to long-term sustainability, improved patient care, and better health outcomes.

An important aspect of alternative quality contracts is that it is private health insurance plans which are introducing them into clinical care settings. This means that arrangements such as the AQC between Partners/Mass BCBS will become more common—but are not likely to attract much media attention. It is a trend which will build with little public notice.

Clinical laboratory managers and pathologists should also take note that, in the Massachusetts BCBS study of the AQC, there was a measurable reduction in expenditures in imaging and testing. This implies that providers participating in an AQC are more careful in how they utilize ancillary services, including medical laboratory testing.

Finally, Dark Daily observes that it is necessary to keep a watchful eye on new care delivery models surfacing within the private payer community. At this moment, the media and healthcare industry is devoting much attention to such Medicare reform programs like accountable care organizations (ACO), value-based purchasing, and bundled reimbursement. However, it is important that the clinical laboratory testing industry also stay up-to-date with how private payers are introducing new care delivery models, such as AQCs.

—Pamela Scherer McLeod

Related Information:

Partners HealthCare to join Massachusetts Blue’s global payment program

Health Care spending and Quality in Year 1 of the Alternative Quality Contract

Blue Cross Blue shield of Massachusetts The Alternative Quality Contract: Year One Results

THE DARK REPORT: Recent Coverage