Massachusetts physician groups reduce spending in global payment reimbursement model

Massachusetts physician groups participating in a global budget reimbursement model were able to reduce the rate of increase in health care spending in year 2 by 3.3 percent, up from 1.9 percent in year 1, according to the Commonwealth Fund.

The study examines spending for physician groups participating in Blue Cross Blue Shield’s five-year Alternative Quality Contract (AQC), which provides rewards to participating physician groups for controlling spending and improving the quality of care delivered to a designated panel of patients.

Key findings:

  • After the AQC was launched, average health care spending increased for both the intervention and control groups, but the increase was smaller for the AQC group. Savings in the second year of the contract were 3.3 percent, or $26.72 per member per quarter. Savings over the two-year period came to 2.8 percent, or $22.58 per member per quarter. 
  • Some of the groups that participated in the AQC had prior experience with risk-based contracts, while others had previously been paid on a fee-for-service basis. Savings were substantially larger among groups that had no prior experience with risk-sharing: over the first two years of the contract, those with no risk-sharing experience lowered the rate of increase in spending by 8.2 percent, or $60.75 per enrollee per quarter. In contrast, those with prior risk-sharing experience had a 1.1 percent reduction in year 1 and a 1.8 percent reduction in year 2.
  • Savings accrued largely from reduced spending for procedures, imaging, and lab tests. The greatest savings were from reduced costs for enrolled patients with the highest health risks. 
  • Ambulatory care quality measures, including those assessing chronic care management, adult preventive care, and pediatric care, improved more in year 2 than in year 1.
  • Ten of the 11 participating physician groups spent below their 2010 targets, earning a budget surplus payment. All groups earned a 2010 quality bonus.

(Source: The Commonwealth Fund,, July 12, 2012)