Global Budget Payment Model lowers medical spending, improves quality

A new study suggests that global budgets for health care, an alternative to the traditional fee-for-service model of reimbursement, can slow the growth of medical spending and improve the quality of care for patients.

Researchers from Harvard Medical School's Department of Health Care Policy have analyzed claims data from Blue Cross Blue Shield of Massachusetts's Alternative Quality Contract (AQC), a global budget program in which 11 health care provider organizations were given a budget to care for patients who use BCBSMA insurance. Such a model contrasts with widely used fee-for-service systems, where providers are reimbursed for each medical service they deliver.

The Alternative Quality Contract predates, but is similar to, the Pioneer Accountable Care Organization contracts that Medicare began this year through the Affordable Care Act, an initiative in which Medicare will reward groups of providers based on improved outcomes and lower health care spending.

The researchers looked at the first two years of data from the AQC and found that the program has, in fact, succeeded in lowering total medical spending while simultaneously improving quality of care.

On average, groups in the AQC spent 3.3 percent less than fee-for-service groups in the second year, the study showed. Provider groups who entered AQC from a traditional fee-for-service contract model achieved even greater spending reductions of 9.9 percent in year two, up from 6.3 percent in the first year. Compared to those groups, groups that entered from contracts that were already similar to the AQC achieved fewer savings in both years. The researchers also found that the improvements in quality of chronic care management, adult preventive care and pediatric care associated with the AQC grew in the second year.

Moving away from fee-for-service models is high on the agenda of those looking to establish a fiscally sustainable, efficient health care system, said Michael Chernew, professor of health care policy at Harvard Medical School and senior author on the study. It is likely that this type of new payment model will grow rapidly in coming years in the nation as a whole, and particularly in Massachusetts. By analyzing this program, we're studying the future before it gets here.

Both challenges and opportunities lie ahead, said Zirui Song, a student at Harvard Medical School and recent graduate of the Harvard PhD Program in Health Policy, and lead author on the study. With global budgets, provider organizations must divide not only dollars, but authority and autonomy among its member physicians and hospitals. While this transition is likely challenging, it represents a real opportunity to align incentives to coordinate care and keep patients healthy. The AQC teaches us that a successful start is possible, and that supportive payer-provider partnerships are critical.

These findings will be published July 11 in the journal