New Global Payment Model Drives Medical Group Investment in Quality Improvement and Referral Management, Says Brandeis University Study

September 08, 2011

Waltham, MA  – In a new study with implications for public and private efforts to implement new health care payment and delivery models, Brandeis University researchers analyzed medical groups’ responses to a new Blue Cross Blue Shield of Massachusetts program that holds them financially accountable for total spending and quality of care, similar to Medicare’s proposed shared savings program for accountable care organizations (ACOs).

The study, published today in the September issue of the journal Health Affairs, is based on interviews with medical groups that signed the Alternative Quality Contract in 2009. This contract now covers nearly 500,000 Blue Cross members. Among the study’s key findings:

  • All of the participating medical groups implemented new information systems and processes to help primary care physicians improve quality scores because of significant potential for quality bonuses under this contract.
  • Many groups implemented referral management programs to direct services to lower cost sites of care where appropriate.
  • Only one of the eight groups identified clinical practice redesign as a top priority in the initial year of the contract.
  • Groups’ initial efforts to improve performance were generally focused on primary care practitioners and services rather than on specialty care.
  • The groups experienced challenges during the contract’s initial year that included clinician resistance to new performance improvement initiatives, limitations in information management capacity, and conflicting financial incentives between global payment and fee-for-service contracts.

“This contract has undeniably encouraged participating groups to invest in improving the quality of care,” says senior author Robert Mechanic. “because its rewards for quality are much stronger than most other payment models including Medicare’s proposed Accountable Care Organization (ACO) program.” Participating medical groups also have strong incentives to manage spending because the annual rate of growth in their total payments are projected to decline by half over the five-year contract. ”Because they operate under a global budget, the medical groups have become more sensitive about the price of services and careful about where they refer patients” said Mechanic, “which creates new pressure for high-priced suppliers to become more efficient.”  Mechanic says that despite an initial focus on quality and referral management, most groups recognize the need to invest in redesigning clinical practice models as the contract advances.


The Alternative Quality Contract. In 2009, Blue Cross Blue Shield of Massachusetts began paying seven Massachusetts provider groups differently under a contracting model called the “Alternative Quality Contract” (AQC). This model is characterized by global payment, whereby provider groups received a budget (defined for five years) to take care of their BCBSMA patients, rather than being paid separately for each service (fee-for-service). In addition to the global budget, groups were eligible for pay-for-performance bonuses, which rewarded providers for meeting certain quality targets. Provider groups in the AQC system assume accountability for spending, similar to Accountable Care Organizations (ACOs).

The Health Industry Forum (www. is a program that brings together leaders from across the healthcare field to develop practical, actionable, market-oriented strategies to improve the quality and value of the U.S. healthcare system. To support this mission, the Forum sponsors independent, objective policy analysis and provides various venues where healthcare leaders and other stakeholders work together to develop strategies and solutions.

Read the Health Affairs article

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The Heller School welcomes media inquiries on this and all other news items. Email Ellen Grody or call 781-736-3903.

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