Microsoft word - aqcwpaperredraft april 2010 v.15 reformatted final.doc

Blue Cross Blue Shield of Massachusetts is an Independent Licensee of the Blue Cross and Blue Shield Association. Paying for a health care system that delivers safe, effective, and affordable care At Blue Cross Blue Cross Blue Shield of Massachusetts, we believe the most promising way to slow rising health care costs is to enable the delivery system to improve the quality, safety and effectiveness of care. To address both cost and quality, we need a health care system in which financial and clinical goals are aligned. A key component is to change the way insurers reimburse doctors and hospitals for their services. BCBSMA has developed and implemented a model: the Alternative Quality Contract (AQC). The new contract model combines a per-patient global budget with significant performance incentives based on quality measures. The AQC places the focus on what matters most to all of health care’s stakeholders— The Challenge The rising cost of health care poses an unsustainable burden on consumers, employers and government, and threatens local and national efforts for health care reform. To do our part as a health plan to move toward solutions, BCBSMA is changing the way we pay for health care. The current fee-for-service reimbursement model has created unintended consequences, rewarding doctors and hospitals for the quantity and complexity of services provided instead of rewarding the quality and outcomes of care. As Karen Davis, president of the Commonwealth Fund has written, “Fee-for-service payments create incentives to provide more and more services, even when there may be better, lower-cost ways to treat a condition….it’s not realistic to tell hospitals and doctors that they must improve quality if by doing so they are likely to lose money.” In 2007, the company evaluated how our method of paying hospitals and physicians could be changed to better support the high-quality care the system is capable of delivering. The challenge before BCBSMA was to create a payment system that would align financial goals with clinical goals, linking payment to quality, outcomes and efficiency. A New Model: The Alternative Quality Contract A team of physicians, finance experts, and measurement scientists worked to develop a contract model that would give hospitals and physicians meaningful incentives to improve the quality of care while conserving health care resources. BCBSMA tested the concept with key hospital and physician leaders, local and national policy experts, employers, and other health care purchasers throughout the development process, and used that feedback and input to finalize the model. What resulted is the Alternative Quality Contract, an innovative global payment model that uses a budget based methodology, which combines a fixed per-patient payment (adjusted annually for health status and inflation) with substantial performance incentive payments (tied to the latest nationally accepted measures of quality, effectiveness, and patient experience). The goal of this restructured model is to enable the delivery system to give the patient the best result from the most appropriate treatment (e.g. based on the best medical evidence), by the right kind of provider (e.g. specialist, family doctor, nurse), at the right time (when intervention is most appropriate), and in the most appropriate setting (e.g. hospital, physician office, independent laboratory, home). The AQC was offered to provider organizations on an optional basis, with the first contracts effective January 2009, and is a key element of BCBSMA’s overall strategy to align payment methods, performance measurement, and provider and member incentives, while increasing transparency of cost and quality information. With this new model contract in place, BCBSMA continues working toward the goals of improving the quality AND affordability of health care for members, providers, and employers. The goal of AQC is to reduce the medical expense trend of participating organizations by half over a five- year contract term, as illustrated below. Otherwise anticipated medical
expense trend
trend increases over time as the rate of increase in provider revenue slows Medical Expense Trend for employers with
employees exclusively enrol ed in an AQC provider

AQC: The Cornerstones
The Alternative Quality Contract includes several key components that are dependent on each other to create
the necessary alignment of incentives:
• Sustained partnership (five-year contract) • Integration across continuum of care Financial Structure
Global Budget. BCBSMA establishes a global budget for AQC provider organizations to cover all services and
costs. The contract model is designed to include inpatient, outpatient, pharmacy, behavioral health, and other
costs and services associated with each of their BCBSMA patients. The initial global budget is based on
historical health care cost expenditure levels. It is adjusted each year for inflation, and the health status of the
provider’s specific BCBSMA patients. Providers retain the margins derived from the reduction of
This arrangement empowers physicians and hospitals to provide the care they believe is needed to improve
the health of their patients. They are liberated from many of the constraints of traditional payment models
giving them the flexibility to, for example, have e-mail exchanges with patients (e-visits), offer group visits
for patients who share a common chronic illness, or provide follow-up home visits for patients after
hospitalizations. This independence from many of the limitations associated with traditional payment models
is the foundation of the AQC.

Performance Incentives.
In addition to the global budget, BCBSMA also offers providers performance
incentives with the potential to increase the total payment by up to 10 percent. It is a key feature of the AQC,
designed to promote quality, safety, and patient-centered care. These incentives apply to both physician and
hospital services, and are intended to support providers in achieving the highest levels of safe, affordable,
effective, patient-centered care. The incentives are linked to clinical performance measures related to
process, outcomes, and patient care experience, and include inpatient and ambulatory care (see attached list,
page 9). Bonus payments for performance on quality measures serve as disincentive for underuse, which was
a key criticism of capitation in the 1990s.
Performance Measures
Performance incentives are linked to an equally important component of the AQC—performance measures,
which are meant to collectively make care safe, timely, effective, affordable, and patient-centered. These
measures are:
• Drawn from nationally accepted measure sets • Grounded in empirical evidence that demonstrates the measure provides stable and reliable information at the level at which they are reported (for example, by individual physician, group practice, or institution). The performance incentives are based on absolute performance rather than the network average to provide stable targets and reward improvement. There is also added weighting for clinical outcome measures, such as keeping blood pressure under control, reflecting the importance of improving the actual health of the patients. Performance measures are established at the beginning of the contract and do not change during its term. An additional feature of the AQC performance incentive model is that it encourages provider organizations to work with us on what we call “developmental measures.” This component of AQC represents a unique collaboration between BCBSMA and provider organizations, offering the opportunity to further develop and test new performance measures that can become important to ensuring safe and effective care. Sustained Partnership
The AQC arrangement is a five-year agreement that encourages providers to invest in long-term, lasting
improvement initiatives. It also establishes a new kind of partnership between the health plan and the
organization that moves away from the sometimes adversarial relationship, which is focused on ongoing
contract negotiations, and toward a more collegial partnership, which is focused on and committed to each
other’s success. Throughout the five years, providers are expected to focus on and carefully manage both the
quality and cost of services their BCBSMA patients require, and to coordinate the integration of their
patients’ care across the full continuum of health care services.

Integration Across the Continuum of Care
The very essence of the AQC is the important role of the primary care physician (PCP) as the center of a
patient’s care. By giving PCPs significantly increased flexibility and rewarding them for improved health
outcomes, the AQC underscores that principle and encourages the integration and coordination of care for
both acute care episodes and for chronic conditions.

AQC Savings Opportunities
The AQC creates new incentives for providers to drive waste out of the system and focus resources on
achieving the highest level of clinical outcomes for their patients by allowing providers to retain savings
from the global budget to re-invest in system improvements. Opportunities to achieve savings under the
AQC include reduction in duplicative services, use of more cost-effective services and providers, and the
elimination of potentially preventable costly services, such as certain hospital complications and

The Financial Structure

• Global budget to cover all health care Initial Global
Budget Level
• Savings opportunities by addressing AQC: The Basics
Provider Criteria. BCBSMA does not require a specific organizational structure for provider organizations to
participate in the AQC. Some AQC contracts are solely with physician groups (PCPs and specialists), while
others are with delivery systems that include both physician and hospitals. The AQC provider organization is
responsible for the cost and quality of services rendered across a member’s entire continuum of care,
including services provided in the hospital setting, regardless of whether or not a hospital is part of the AQC
arrangement. The provider groups can retain savings if costs go down, and are responsible if costs increase,
putting the focus on accountability and potential reward for improvement with the AQC group. In those
instances when hospitals and physicians are collectively included in the AQC contract, hospitals and
physician groups share accountability. The level of risk can vary by provider group, but within a group, the
up-side risk (potential savings) is always equal to the downside risk (potential costs.)
Baseline criteria includes that the participating group must have PCPs who care for at least 5,000 to 10,000
BCBSMA HMO members, depending on the level of risk assumed by the group.
Member Criteria. Currently, the AQC applies only to members with HMO coverage, because the HMO
requirement to select a primary care provider allows us to direct payments to the AQC group with which
each member’s primary care provider is affiliated. We are exploring ways to expand AQC membership
criteria to include PPO members by applying a sound methodology for “attributing” a PCP to each member.
Payment Process. Throughout the term of the AQC, all member claims are reimbursed on a fee-for-service
basis. At the end of each year, all of the services and costs, including inpatient, outpatient, pharmacy,
behavioral health, and others that are associated with the AQC provider organizations’ BCBSMA patients,
are then charged against the AQC global budget. This determines the provider organizations’ performance
relative to the global budget.
To maximize provider groups’ success, we have dedicated BCBSMA resources to support the success of our AQC Practice pattern variation, or differences in treatment of a given condition that are The process begins with a self-assessment that helps each not explained by scientific evidence, are group determine their readiness to be accountable for cost and quality and to manage an annual budget for all of the medical services their BCBSMA patients receive. eliminating unnecessary care. To support • AQC Executive Dashboard – a quarterly financial vary in the treatment of specific clinical conditions. (Select clinical priorities in which unexplained practice variation Example: Benign hypertension
Step 1:

Reports on specific areas of interest (e.g. high-tech condition shows that within the total cost radiology, readmissions, non-urgent emergency costs per provider vary by more than five times as much as lab tests or office visits. Performance improvement medical management Step 2: A closer look at pharmacy costs
consultative support – includes monthly meetings with BCBSMA’s medical directors, analysts, and the AQC group’s leadership to identify areas of opportunity and Consistent member communication/messaging and collaboration with AQC groups on patient communication • Training and support (e.g. AQC user group for data Step 3: BCBSMA provides physician-
• Collaboration and best practice sharing. encourage providers and their patients to discuss and explore the feasibility of
ACE inhibitors.
The result: In addition to the immediate
cost savings to the health care system,
members also experience lower
prescription drug costs, which can lead to
better levels of treatment adherence and,
therefore, better long-term outcomes for
the patient. [Greene R, Beckman H, Mahoney
T. Beyond The Efficiency Index: Finding A
Better Way To Reduce Overuse And Increase
Efficiency In Physician Care. Health Affairs.
2008; 27(4): w250-w259.]

How is the AQC Different from Capitation? Mindful of the criticisms of capitation, BCBSMA designed the AQC to address and incorporate the lessons learned, advancing global budgets past the pitfalls of the 1990s: • Concern: Capitation failed to adequately fund care. AQC Solution. In the AQC, the global budget is based on actual historical costs for a patient and is
adjusted for health status so that payments adequately reflect the relative morbidity of patients. The
budget is also adjusted annually, in line with inflation. In addition, the contract is intended for
providers with a sufficient number of BCBSMA members to support an adequate distribution of risk.
• Concern: Capitation fostered underuse of health care services. AQC Solution. Since the AQC includes a global budget for all services received by a BCBSMA
member, and provides incentives for quality outcomes, the contract model rewards doctors for
providing appropriate and efficient care.
• Concern: Capitation failed to address quality, focusing exclusively on cost of care. AQC Solution. The global budget is coupled with a set of nationally accepted performance measures so
that BCBSMA and providers can ensure that patients are receiving safe, appropriate, and effective
care. This pairing of payment with performance measures safeguards patients from undertreatment
by documenting and holding providers accountable for both the delivery of appropriate services and
the health outcomes associated with those services. Public reporting of physician and hospital
performance, which is in development in Massachusetts, will further strengthen that level of
• Concern: Capitation created incentives that encouraged physicians to avoid sick patients. AQC Solution. By adjusting the global budget for health status, the model adequately considers
changes in patient morbidity, eliminating any incentive to avoid sick patients.
• Concern: Capitation shifted all risk to the provider organization rather than just utilization risks associated with providing health care.
AQC Solution. The AQC is designed to have an appropriate level of risk sharing between BCBSMA
and the provider organization. BCBSMA offers differing levels of risk sharing arrangements with
AQC provider organizations, depending on the size of the group, the degree of integration, and the
ability to assume risk for utilization and variations in care. In addition to risk sharing, the AQC
includes tools to protect providers from unforeseen financial impact, including adjusting for health
status, risk limits (typically BCBSMA is responsible for large losses on individual claims or across
populations), and stop-loss (or reinsurance.)

Meeting the Challenge
BCBSMA has entered into new partnerships with nine provider groups, who represent about 25 percent of
our network’s primary care physicians, about 23 percent of our network’s specialists, and about 31percent of
our HMO membership.
BCBSMA is in the process of discussing AQC arrangements with additional provider organizations for 2010
participation, and anticipates that the number of providers who sign an AQC will continue to increase over
the next several years.
There are early indications among participating AQC physician groups and hospitals that their efforts are
having the desired effect, aligning the incentives of patients, physicians, hospitals, employers, and health
plans to advance high-quality, high-value health care.
Validating Progress The Commonwealth Fund has commissioned a study led by Michael Chernew, M.D., Ph.D., from Harvard Medical School, and Robert Mechanic, Senior Fellow, from the Heller School for Social Policy and Management, Brandeis University, to evaluate the AQC. The study will incorporate claims data from calendar years 2005 through 2010. By analyzing sufficient pre- and post-AQC adoption data, the study will provide a valuable lens to measure success. The study will also provide key insights for physician groups, health systems, payers, and public policy leaders about success factors and challenges associated with the AQC and will help inform future policy development related to health care payment reform. By restructuring the system to appropriately align financial and clinical incentives in ways that improve the quality of care, which ultimately will impact costs, the AQC will help the industry move away from the unintended consequences of the fee-for-service model. Instead of rewarding volume and complexity of service, the AQC helps foster accountability, coordination, safety, and effectiveness. BCBSMA looks forward to continue working with our provider partners, our customers, and all industry stakeholders to shape this and other solutions to meet the challenges of health care costs and quality. Measures Included in the Alternative Quality Contract Depression
Cholesterol Management
Heart Failure
Cancer Screening
Preventive Screening/Treatment
Adult Respiratory Testing/Treatment
Medication Management
Surgical Infection
Pedi: Testing/Treatment
Pedi: Well-visits
23 Select infections due to medical care Hypertension
Outcomes Cardiovascular Disease
28 Obstetrics Trauma-vaginal w/o instrument Patient Experiences (C/G CAHPS/ACES) -
Hospital Patient Experience (H-CAHPS)
Patient Experiences (C/G CAHPS/ACES) -
Pediatric 3
Blue Cross Blue Shield of Massachusetts is an Independent Licensee of the Blue Cross and Blue Shield Association. Addressing Unexplained Practice Variations: Select Clinical Priorities
Advanced Imaging

1 MRI in bursitis, tendonitis, neck and back 2 Nuclear imaging in cardiology 3 Ultrasound Prescription Medicines
5 Unnecessary use of antibiotics for bronchitis 6 Overuse or early use of third line treatment, for example Avandia for diabetes 7 Use of brand over generic Rx for bronchitis, hyperlipidemia, hypo-functioning thyroid gland, Orthopedic Procedures
Treatment of Sinusitis
12 Surgery: fiberoptic laryngoscopy and nasal endoscopy 13 Cardiac procedures: catheterization and CABG 14 GI endoscopy with biopsy 15 Asthma: inhaled steroids 16 Benign neoplasm of the skin: complex removal methods used in absence of clinical need



CURRICULUM VITAE Date: October 14, 2012 Name: James Ray Roberson, M.D. Office Address The Emory Orthopaedics Center 59 Executive Park South Suite 2000 Atlanta, Georgia 30329 E-mail address: Citizenship: Current Titles and Affiliations Academic Appointments Primary appointments Department of Orthopaedics Emory University School of Medicine Septembe

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