Blues’ Payment Model Keeps Pace with Inflation

Blue Cross Blue Shield of Massachusetts believes its newly inked provider pact with Caritas Christi Health Care — a community-based hospital network in New England with a network of 1,100 physicians that cares for about 60,000 members — will help bury the industry’s fee-for-service payment model.

In a nutshell, the payment plan — dubbed an alternative quality contract — combines a fixed payment per patient based on age, sex, and health status with an incentive payment earned for the quality and effectiveness of the care provided. This is the plan’s eighth AQC deal, which arrives as Massachusetts hosts a fierce debate over whether the traditional fee-for-service approach to paying providers should be axed. And while it may sound a lot like capitation, that’s not a word anyone at the health plan likes to bandy around.

The AQC plan is similar to a capitation agreement in that it establishes a per-member, per-month payment. But Deb Devaux, executive director of community transformation for the insurer, is careful to highlight some significant differences from a payment method that sparks bitter memories among providers from when it was tried in the ’90s.

“Capitation wasn’t funded adequately,” she says. With this new plan, the managed care organization worked with Caritas to establish the track record on health care costs for their patients, looking back over previous claims to come up with a reasonable idea of what the annual fee should be.

But the BCBS plan is intending to rein in costs by reducing waste and poor utilization. So the providers’ rates will rise at a sharply lower pace than the blistering 8 percent to 10 percent annual pace the plan has been experiencing for several years.

“These contracts are structured so that providers’ rates don’t rise so sharply, and the employer gets the benefit,” says Devaux. “We targeted about 2 percent [over inflation] and we want to fall in line with inflation, which has been 3 percent to 4 percent up to now.”

While about 20 percent of providers in Massachusetts have switched to global payment, many physicians continue to mount fierce resistance. In particular, the state medical association says that only big provider groups with a large patient base have the revenue and sophisticated information technology needed to successfully pull it off. Small practices just can’t do it.

But Devaux notes that the new BCBS pact with Caritas includes small physician practices that are part of a larger association, offering one model that other small practices might follow. Sticking with the current system, Devaux adds, is not an option.

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