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Blue Cross extends revised contracts for care

Partners, Steward, Lahey PPOs recruited

Andrew Dreyfus of Blue Cross seeks to slow rising medical costs.PETE MAROVICH IMAGES/FILE 2014/Pete Marovich Images

Blue Cross Blue Shield of Massachusetts is making an aggressive push to change the way insurers pay for health care, signing three of the state's largest health systems to new contracts aimed at slowing rising medical costs.

Blue Cross, the state's largest private health insurer, said Monday that Partners HealthCare and Steward Health Care System, both of Boston, and Lahey Health of Burlington have agreed to contracts that would set budgets to care for patients and reward providers for keeping patients healthy and away from expensive hospital stays and procedures.

The contracts are a sharp departure from traditional reimbursement methods, which pay doctors and hospitals for every visit and procedure, providing incentives to do more and more, regardless of the costs and outcomes.


Partners, Steward, and Lahey, along with Mount Auburn Hospital in Cambridge, will extend the Blue Cross contract to a combined 300,000 patients, said Blue Cross chief executive Andrew Dreyfus.

The contract applies to people with health plans called preferred provider organizations, or PPOs, which, unlike health maintenance organizations, or HMOs, do not require care to be coordinated through primary care doctors.

Blue Cross already has similar contracts in place for about 600,000 members of HMOs. All told, Blue Cross will insure about 900,000 members under the new payment system, beginning Jan. 1. That's roughly 40 percent of Blue Cross's 2.1 million members in Massachusetts.

"It sends a message to the health care community in Massachusetts and beyond that this is the prominent way that we will pay for care in the future," Dreyfus said in an interview. "It's a significant endorsement of the model and the shared belief that paying for value and paying for quality is the way our health care system needs to move."

Blue Cross became the first Massachusetts insurer to test this new way of paying for medical services in a big way in 2009. Since then, Blue Cross has expanded the product to cover more members, announcing earlier this year that it would extend the model to PPOs in addition to HMOs.


Alternative payment models are designed to give doctors and hospitals incentives to keep the cost of care down by reducing unnecessary hospital stays and preventing serious illnesses. Doctors are scored on quality measures, which track, for example, whether they are screening patients for certain cancers and keeping blood pressures in check. When doctors stay within budget and score well on the quality measures, they earn more money.

Beginning in January, doctors will also be paid partly based on how patients report their progress after receiving care: for example, how long it takes patients to get back on their feet after hip replacement surgeries.

"We're excited it's tied to patient experience," said Amy Whitcomb Slemmer, executive director of Health Care for All, an advocacy group.

Partners spokesman Rich Copp said the health system, which includes Massachusetts General and Brigham and Women's hospitals, joined the new contract to help slow the growth of health care costs while ensuring patients receive high-quality care. Partners' hospitals are among the state's most expensive.

"This new model is innovative," Copp said in a statement. "But this is still a new model and we will have to monitor it carefully as it gets implemented to ensure it meets the needs of our patients and physicians."

Dr. Sanjay Shetty, president of Steward's doctors network, said the new payment model aligns with Steward's approach to delivering care. "We believe that paying in this way is crucial to improving care and lowering costs," Shetty said in a statement.


But alternative payment models have also raised concerns. Last month, Attorney General Maura Healey released a report that found these contracts are not addressing disparities in how doctors and hospitals are paid by insurers for essentially the same services and quality of care. She said such payment models are reinforcing price variations, with higher-cost providers continuing to receive more money per patient than their lower-priced competitors.

Dreyfus, the Blue Cross chief executive, noted that studies have shown Blue Cross's alternative payment models have saved money and improved the quality of care over time. Blue Cross plans eventually to extend quality-based payments to most of the providers in its network. Other commercial insurers have also turned to such payment models, as has Medicare, the government insurance program for seniors.

"The new Blue Cross Blue Shield of Massachusetts payment model encourages all of us to provide more coordinated care to a large group of patients," said Dr. Howard Grant, chief executive of Lahey Health, in a statement. "We look forward to working with Blue Cross Blue Shield. . . to further lay the groundwork for controlling health care spending in the Commonwealth."

Priyanka Dayal McCluskey can be reached at priyanka.mccluskey@globe.com. Follow her on Twitter @priyanka_dayal.