BCBS of Mass. CEO: Global payment success 'shows we don't have to wait for political consensus to act in healthcare'

A recent study published in The New England Journal of Medicine found Blue Cross Blue Shield of Massachusetts' global budget payments slowed down spending growth while improving healthcare quality — achieving what BCBS of Massachusetts' CEO referred to as the "holy grail in healthcare": higher quality at a lower cost.

The study, out of Boston-based Harvard Medical School, found medical spending growth for BCBS of Massachusetts members under the global payment contracts was, on average, $461 lower per enrollee than in control states. That's a 12 percent relative savings on claims.

The Harvard study supplements previous analyses that found BCBS of Massachusetts' global payment system, dubbed the Alternative Quality Contract, is working. A 2017 study published in Health Affairs found the model, which uses a budget-based methodology combining a fixed per-patient payment with substantial performance incentive payments, also narrowed health disparities.

American researchers aren't the only ones interested in what BCBS of Massachusetts and its partnering providers are doing. Representatives from Scotland, Australia and the Netherlands have come to study the model. 

"There's a place in Scotland which was trying to adapt a version of this program," Andrew Dreyfus, president and CEO at BCBS of Massachusetts, told Becker's. "Even in countries that we tend to look at as more advanced in some respects, that they cover everyone and establish a national budget for healthcare, still struggle with how to adjust and modify incentives to produce better quality at lower cost."

Here, Mr. Dreyfus, along with Matt Day, senior vice president of network payment innovation and contract management, answered Becker's questions about how positive results from the AQC program are directing the insurer's next move, where the savings are going and why political consensus in healthcare doesn't have to be a precursor to change. 

Editor's note: Responses have been lightly edited for clarity and length.

Question: The results of the Harvard study were arguably quite positive. Where is BCBS of Massachusetts going from here?

Andrew Dreyfus: We were very pleased that the study found both quality improved markedly while costs grew more slowly than they would have otherwise. We think of the holy grail in healthcare as better care at a lower cost, and we feel we achieved it.

We realize we have to do even more. In our latest work that Matt is leading, we're trying to deepen the partnerships we have with clinicians to produce even better results. We're also concerned about clinicians themselves. Clinicians often face difficult demands with EMRs, scheduling and the administrative overhead of healthcare. The next generation of work we're going to do in payment reform will focus on simplifying the experience, both for patients and clinicians. 

Q: How do you think these positive results will inform BCBS of Massachusetts' next steps in its AQC payment model?

AD: First of all, from an affordability perspective, we need to do more, because our customers are still experiencing premium increases they struggle with. We still think there's a lot of excessive spending in the system that doesn't provide clinical value, and we need to find ways to reduce it.

We also think, from a quality perspective, that we're moving into a next generation of ways to measure quality. For example, early on in our work in payment reform, we measured patient experience, and we still measure that, but increasingly we're measuring patient-reported outcome measures. That's the patient's report of their functional status post-surgery, for example, as opposed to their experience with a physician.  

Matt Day: Affordability is key. Twelve percent obviously is a huge result in healthcare that we're very proud of and happy to have our provider partners working with us … but we do hear from our members that we have to go further. From a more practical measure, the success of the AQC has given us a great foundation to bring these incentives of a global budget and strong quality to other corners of the delivery system. We launched a sort of global budget pilot last year for a local hospital. We've also been piloting this same type of model but bringing it to a much smaller physician practice.

Q: Have other payers reached out seeking advice on implementing similar policies?

AD: Our program was actually referenced in the original ACO regulations issued by the federal government. Some of our early results gave confidence to the public sector, especially the Medicare program and increasingly the Medicaid program, that they could use these kind of financial incentives to improve care and lower costs. On the commercial side, from the very beginning we've had some of our sister BCBS plans come for intensive workshops in our program. Between Matt, myself and a former employee, we've given maybe over 100 talks around the country over the course of the last 10 years [on the model]. Some have replicated the model pretty closely, others have taken some of the ideas and adjusted it for their market and practices they're working with.

Q: What are you doing with the savings?

MD: They're fully passed back. The way we pay for care, like under a fee-for-service model, the actuaries build up the claim costs into premiums. The same happens here. These have been fully incorporated into the prices we charge into the bills that a self-funded customer may pay. 

AD: In Massachusetts, the state sets a benchmark of how much healthcare costs should grow in a given year. Now it's 3.1 percent. Every year, we and all the other plans and hospitals get measured against that benchmark. We've been in the 1.5-1.8 percent range for the last several years. By that measure, I think it's another indication of our success in trying to slow the rate of growth in costs. I never say lower costs because that's really not an accurate statement, it's a lower rate of growth in costs.

Q: How has a global payment mechanism affected BCBS of Massachusetts' relationships with providers?

AD: Rather than being on opposite sides of the table, though we still negotiate with them, I like to think it kind of put us on the same side. As a nonprofit plan committed to this community, hospitals and physician groups recognize that we're in this to improve health and not just earn a margin and advance our business interests. I think if you asked a few, I hope you would hear something like that. It's not that we always agree, and there is some appropriate tension in the relationship because we are acting on behalf of our customers who purchase the care and they're actually providing the care. But it very much feels like a joint model, which we're mutually committed to each other's success.

Q: What does the AQC and its results say about change in healthcare?

AD: Sometimes people believe big change in healthcare requires enacting legislation and creating a big regulatory structure. This required no legislation, no government regulation. It just required a health plan and a group of providers believing in one another and working together toward a mutual goal. In that way, it shows we don't have to wait for political consensus on every issue to act in healthcare. We can act and make real progress.

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