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Blue Cross plan shows reduction in spending

The largest private-sector effort to tame medical spending in Massachusetts appears to be getting results, as doctors who agreed to work on a budget have cut costs by using less-expensive imaging and lab companies and expanding office hours to reduce emergency room use.

Health spending for patients treated through Blue Cross Blue Shield of Massachusetts’ pioneering global-payment program grew more slowly in 2010 than for patients whose physicians were paid the traditional way — receiving a separate fee for every office visit, test, and procedure. At the same time, the 4,800 doctors in the program scored higher on measures of quality of care, according to research published Wednesday.


The study, led by Boston researchers and published online by Health Affairs, bolsters its proponents’ hopes that the approach will play a key role in controlling health spending. President Obama’s health care law establishes a similar budget payment program for Medicare providers, and Massachusetts lawmakers are pushing the same strategy in legislation they plan to finalize this month.

“This is extremely encouraging,” said Paul Ginsburg, president of the Center for Studying Health System Change, a nonprofit research organization in Washington, D.C., that was not involved in the study. “It shows the potential of this whole approach to eventually save on [insurance] premiums.”

In the Blue Cross program — called the alternative quality contract — physicians, and sometimes their affiliated hospitals, accept an annual budget to care for a large group of patients. The amount is adjusted for how healthy the patients are, but is not affected by the number of tests, appointments, and procedures they get. If doctors exceed the budget, they owe Blue Cross money; if doctors come in under budget, they split the proceeds with the insurer.

Physicians also earn bonuses of 2 percent to 10 percent of their budget for providing good care. Blue Cross monitors quality indicators, such as whether doctors control patients’ blood pressure, provide regular check-ups to children, and prescribe appropriate and timely medications for depression. Compared to the control group, doctors with the alternative contract improved care for chronically ill adults and preventive care for both adults and children more quickly, the researchers found.


Doctors with the alternative contract spent 3.3 percent less in 2010 than doctors not in the program, an average savings of about $107 per patient. A previous study had reported more modest savings during the program’s first year. The same researchers found that doctors participating in 2009 spent 1.9 percent less than doctors who were not participating, an average savings of $62 per patient. Those savings not only expanded in 2010, but some doctors groups spent as much as 10 percent less than colleagues paid under the traditional fee-for-service system.

“That’s a really big number,” said Dana Gelb Safran, a senior vice president at Blue Cross and a professor at Tufts University School of Medicine who worked on the study. And the physicians reduced spending “in a really smart way,” she said.

Doctors generally did not disrupt existing relationships between patients and specialists and hospitals, even if they were high-priced, she said. Instead, they switched to lower-cost options when the particular provider mattered less to patients, such as for scans — a change that nonetheless hurt hospitals financially because they generally charge more for imaging than free-standing centers.

“They aren’t doing the radical things people feared they would,” Safran said of doctors’ decisions.


In addition, some physician groups reduced the amount of medical care their patients used by better managing chronically ill patients to avoid hospital stays and offering extended office hours for urgent care rather than directing patients to emergency rooms.

Michael Chernew, a professor of health care policy at Harvard Medical School and senior author of the study, said the results are encouraging but not definitive.

In the second year of the contract, the bonuses and budgets for doctors were “sufficiently generous” so that the overall dollar amounts Blue Cross paid to the medical groups did not slow compared to what it paid other practices. Therefore, the money the doctors saved on care was not reflected in insurance premiums.

“Whether they can change enough to hit the targets when they get tighter remains to be seen,” he said.

Those budgets have been tightening during the last three years of the contract, and Safran said she expects that by next year the annual increase in what Blue Cross pays participating groups overall will slow to general inflation.

State Senate and House leaders are negotiating a compromise bill to control health care costs. Each passed its own legislation earlier this year, with the House bill containing more regulation of providers. While some industry leaders may argue that the Health Affairs study shows regulation is unnecessary to save money, Representative Steven Walsh,a Lynn Democrat overseeing the House’s efforts, said the results bolster the House plan to push the market toward budget-type payments.


The bill encourages providers to move away from fee-for-service medicine, which is seen as promoting unnecessary care. “This proves that if doctors manage chronically ill patients regularly and move to global payments, you can save money,” he said.

The study’s authors and others cautioned that doctors who agreed to join the alternative contract may not be representative of all providers. For example, Ginsburg said it may be more difficult for large hospital-led organizations to reduce spending because they are more conflicted about switching patients to competing lower-cost providers.

“They are not going to send their patients to another hospital,” he said. “It’s one reason they got into the [Blue Cross alternative contract] later.”

Boston Children’s Hospital and Partners HealthCare, which includes Massachusetts General and Brigham and Women’s hospitals, signed onto the alternative contract just this year. All three are among the more expensive providers.

Dr. Thomas Lee, head of the Partners physician organization, said doctors and patients are feeling an effect. Brigham doctors, for example, receive regular reports on how often they admit patients to Faulkner Hospital, a less-expensive Partners facility, rather than to Brigham, for basic care. Brigham patients who do not require complex emergency care on the weekends are now sent to Faulkner for urgent care.

“This has accelerated everyone’s plans to do the right thing and get organized and take better care of people,” Lee said.

Liz Kowalczyk can be reached at kowalczyk@globe.com. Follow her on Twitter @GlobeLizK.