Blue Cross Pushes for Global Payments

 

Blue Cross Blue Shield of Massachusetts, the state’s largest health insurer, says its new system of paying doctors a fixed amount per patient improved care during the first year, contrary to critics’ fears that patients would be harmed. Within days of this announcement, Blue Cross’ chief executive called on hospitals and doctors to step up efforts to contain health care costs, warning that those insisting on traditional fee-for-service contracts will face level or reduced payments from his company.

How Global Payments Work Under Blue Cross

Doctors who have agreed to the “alternative quality contract’’ with Blue Cross are paid a set monthly fee per patient, adjusted for how healthy the patient is, regardless of how many tests, appointments, and procedures the patient gets. Physicians can earn bonuses for improving care, up to 10 percent of their budget.

According to Blue Cross, during 2009, the 6,300 doctors paid under the new method improved care for their patients faster than the 14,200 other doctors in the Blue Cross HMO network. Quality was assessed using dozens of criteria, such as the percentage of diabetics whose glucose, blood pressure, and cholesterol levels were regularly measured and under control.

Company executives said they believe the contract is helping to control medical costs, its primary purpose, but the growth of health care spending is slowing overall, making it difficult to draw firm conclusions about the reasons. They did not release comparisons of costs among the different doctors groups.

Global Payments Are the Wave of the Future

Both state and federal officials are also pushing for ways to control medical spending, and “global payment’’ models such as the one being used by Blue Cross are considered the most promising. Dr. JudyAnn Bigby, Massachusetts secretary of health and human services, said that she plans to hand the Legislature a specific proposal within the next several weeks to switch providers to a global payment system. “The incentives we have now are all in the wrong way,’’ she said. Most doctors and hospitals are paid separately for each test, procedure, and office visit, which many believe encourages unnecessary, poorly coordinated care and is driving up costs. “We should be examining [the Blue Cross system] very closely as we think about implementing payment reform in a more broad way,’’ Bigby said.

In addition to the Patrick administration’s impending legislation, the federal government has made it clear that changing how providers are paid is a priority. This year Medicare will give out $10 billion to 100 to 300 sites in the United States to test new payment models, and many Massachusetts providers plan to vie for this seed money.

Support and Criticism

Doctors in the Blue Cross network paid under the new system treat 405,000 of the company’s 2.9 million members, making it one of the largest pilot projects in the state testing ways to control health care costs while making sure patients get the care they need. Blue Cross chief executive Andrew Dreyfus said doctors with the contract are on track to cut increases in health care spending in half within five years. Medical spending among Blue Cross providers grew an average 10 to 12 percent between 2008 and 2009; the goal of the five-year alternative contract is to reduce the increase to 5 to 6 percent for groups that signed the contract in 2009. Doctors in the alternative contract also reduced hospital readmissions, saving $1.8 million, while readmissions among patients of other doctors grew, Blue Cross executives said. “We’ve got enough critical mass and early results that we think this is a good model for payment reform,’’ said Patrick Gilligan, Blue Cross senior vice president for health care services.

Blue Cross did not release specific performance results for doctors groups. It said it evaluates doctors on dozens of measures, including whether they screen patients for cancer, provide regular preventive checkups for children, and manage chronically ill patients so their diseases do not get serious enough to require hospital care. The insurer scores doctors on a scale of one to five, with five earning doctors the largest bonus. To earn a five, a doctors’ group has to show, for example, that at least 97 percent of its diabetic patients have their blood sugar, cholesterol, and blood pressure under control.

Blue Cross executives said they have not seen a change in patient satisfaction scores. The insurer has hired a customer service staff specifically to handle calls from patients whose doctors have the alternative contract, but executives said they have not seen an increase in complaints.

Other doctors and health care executives cautioned against drawing definitive conclusions from the insurer’s early results. They have not been independently reviewed and may not be easily reproduced statewide. Dr. Alice Coombs, president of the Massachusetts Medical Society, said Blue Cross members may not be representative of the most difficult patients to manage, including the urban poor with complex medical problems. And, she pointed out, physician groups that sign on to the alternative contract, particularly those that did so early on, are those with sophisticated computer systems that allow them to track patients’ care and know they can be successful under budgeted payments.

What this Means for Hospitals

Since doctors generally must pay for a patient’s hospital care out of a budgeted fee, groups in the Blue Cross alternative contract are starting to refer patients to less-expensive hospitals, Dreyfus said. Dr. Mitchell Selinger, Blue Cross senior medical director for managed care, said that his group is referring fewer patients to expensive Boston teaching hospitals and that patients sometimes do not like that. “We have had some pushback,’’ he said. In that case, it is up to the individual doctor whether to relent and make the referral to Boston or not, he said.

Doctors at Signature Healthcare in Brockton reduced avoidable emergency room visits 25 percent, from 2,249 in 2008 to 1,685 in 2009, saving $300,000 in payments to hospitals, Blue Cross calculates. Dr. Mitchell Selinger, senior medical director for managed care, said the group did this by expanding its weekend and evening office hours for patients.

Eric Beyer, chief executive of the Tufts Medical Center Physicians Organization, which employs 550 doctors, said a global payment system gives smaller providers an opportunity to succeed, but only if they better assess patient data and more efficiently deploy doctors to manage care.

Andrew Dreyfus, who took the helm at Blue Cross Blue Shield in August, who once worked in state government and for the Massachusetts Hospital Association, said Blue Cross Blue Shield will take a hard line in negotiations with hospitals and doctors that don’t agree to accept global payments. “Fee-for-service payment rates cannot continue to rise if we are to meet the community’s goal of affordable care,’’ he wrote. “Ultimately, we must continue our work to identify ways to reduce the level of payments.’’

Blue Cross, which insures nearly 3 million state residents, has an outsized influence on employers and health care providers. Dreyfus’s letter acts as “both a threat and a promise,’’ said Stuart H. Altman, health policy professor at Brandeis University. “He’s saying to the hospitals, you can do better under global payments. But he’s also saying, if you don’t want to do it, if you’re more comfortable with the fee-for-service system, forget it, we’re going to come down on you.’’

“What Blue Cross is basically saying is it’s not going to be about (market power) any more,’’ said Ken Hanover, chief executive of Northeast Hospital Corp., which owns Beverly Hospital and Addison Gilbert Hospital in Gloucester. “It’s going to be about quality and managing the cost of care. This is going to require a significant restructuring of the Massachusetts health care delivery system.’’

Who’s To Blame for Premium Increases?

Massachusetts employers have long chafed at annual double-digit premium increases, with most blaming Blue Cross and other insurers for the relentless trend that crimps hiring by raising employee costs. Health care providers and insurers clashed last year over who was responsible for the rising costs that led to the state imposing premium rate caps for plans covering small businesses and individuals. Now, they are jockeying for position as Governor Deval Patrick’s administration readies legislation that is expected to require hospitals and doctors to move toward fixed annual payments. Patrick has made limiting the rise in health care costs a priority for his second term.

While insurers have borne the brunt of criticism from employers and workers over the past year, Dreyfus said he is intent on changing that dynamic. In an interview, he said Blue Cross Blue Shield is preparing to “organize all our goals around the central principle of affordability.’’

Dreyfus also acknowledged there is a public perception that Blue Cross executives have been overcompensated. To counter that, he said, he has asked that his salary be limited to $800,000 this year, in addition to incentive pay if he meets certain corporate goals. His predecessor, Cleve L. Killingsworth, was paid $1.9 million in 2009, and before him, William C. Van Faasen collected more than $16 million in retirement benefits when he stepped down as chief executive in 2005. Van Faasen is now board chairman.

Partners spokesman Rich Copp said the health care system has begun initiatives to improve care and lower costs by redesigning the way conditions such as strokes and colon cancer are handled. Copp said Partners, the state’s largest hospital chain, has told Blue Cross and other insurers that it is willing to reopen contracts that don’t come up for renewal until next year. “We want to work with insurers to craft solutions that can reduce health care costs and bring value to patients,’’ he said.

Hospitals, under intensified pressure from insurers and state officials, say they have kept costs below projected levels over the past two years, saving more than $3 billion, according to a report by the state hospital association. “We’re working on costs,’’ said Tim Gens, the group’s executive vice president and general counsel. Cooperation from hospitals will be critical to the success of any attempt to control expenses, said Nancy C. Turnbull, associate dean and senior lecturer on health policy at the Harvard School of Public Health. “Hospitals account for 30 to 40 percent of health care costs’’ in Massachusetts, said Turnbull.

At the same time, nonprofit hospitals are being financially squeezed by cuts in Medicaid and other government payments. Community hospitals and smaller academic medical centers say they can’t command the same reimbursement rates granted by insurers to dominant market players such as Partners HealthCare System and Children’s Hospital Boston.

-Adapted from “Insurer says new pay plan working; Blue Cross cites improved care” b y Liz Kowalczyk, Globe Staff , The Boston Globe, January 21, 2011, http://www.boston.com/lifestyle/health/articles/2011/01/21/blue_cross_blue_shield_of_massachusetts_says_new_pay_plan_working/, retrieved 1/24/11; and . “Blue Cross CEO says providers must control costs, or else; Insurer pushes for switch to new payment system” , by Robert Weisman, Globe Staff , The Boston Globe, January 23, 2011 , http://www.boston.com/business/healthcare/articles/2011/01/23/blue_cross_ceo_says_providers_must_control_health_care_costs_or_else/ , retrieved 1/24/11.

 

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