Global Budget Payment Model Lowers Spending, Improves Care Over 4 Years

Using global budgets for healthcare instead of traditional fee-for-service improves quality of patient care and lowers costs, according to a new study by researchers from Harvard Medical School (HMS)’s Department of Health Care Policy.

The study, published in the New England Journal of Medicine, analyzed claims from the first 4 years of Blue Cross Blue Shield of Massachusetts’ Alternative Quality Contract (AQC). The program gives provider organizations a budget to care for patients insured under the plan. The researchers compared spending and quality among enrollees whose physicians participated in the AQC with people in control states (Connecticut, Maine, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont).

“These results are encouraging, because, throughout our healthcare system, spending is growing at an unsustainable rate and our quality of healthcare is not as high as it should be,” study author Zirui Song, HMS clinical fellow in medicine and resident at Massachusetts General Hospital, said in a statement. “Global budgets and other payment reform initiatives provide incentives for physicians and hospitals to think collectively about population health and to focus on coordination of care.”

Among the first AQC cohort, spending grew an average of $62.21 per enrollee per quarter less than the control cohort’s spending during the 4-year period. Overall, they saved 6.8%. The 2011 AQC cohort performed best, reporting average savings of 9.1% by the end of 2012.

Part of the reason why AQC enrollees experienced smaller increases in spending could be from a reduction in the use of services, some of which may be overused in the first place.

The authors also reported that AQC enrollees experienced larger improvements in quality of care measurements. Prior to the program, members received quality of care that was on par with local and national averages. Improvements include preventive care for adults and healthy children, and improvements in the management of serious chronic illnesses.

“The healthcare system is transforming as we move to new payment models,” said Michael Chernew, Leonard D. Schaeffer Professor of Health Care Policy at HMS, and co-editor-in-chief of The American Journal of Managed Care. “While there’s certainly more to learn, preliminary results suggest that this transformation may improve quality and at least in some settings reduce spending.”