Total Cost of Care contracting gaining some steam

The Massachusetts Quality Contract has received a lot of attention. Similar programs in Illinois and Minnesota are ongoing as well. What are these contracts and what is their purpose? The following is an excerpt from a recent paper produced by BDC Advisors, a consulting firm:

"These contracts now cover approximately 500,000 lives-approximately 50% of Blue Cross' HMO and Point of Service (POS) business in Massachusetts. The AQC contract has twin goals of improving quality and outcomes and significantly slowing spending growth.

The AQC is a "modified global capitation contract" in which payments to providers are based on an annual negotiated budget which covers the total health care services provided to Blue Cross patients, whether or not these services are provided within the provider groups' network. In fact, providers participating in the AQC provide only 35% of the total care for the HMO members within their individual networks according to Blue Cross. Pharmacy, home health, nursing home care, emergency admissions, specialist visits, and elective maternity services all can occur out of network making coordination of the continuum a major health management issue.

The Blue Cross AQC agreements last five years and include an annual spending growth limit, incentive payments for improving quality, shared savings incentives, and technical support and grants to build the infrastructure of participating providers."

In Minnesota and Massachusetts after the first year significant bonuses were paid to most providers. This is an interesting experiment to watch as we move further into the Medicare ACO payments world. I have spoken to many Healthcare Value Network members in these states and their concern is universal. Each payer has a different method of determining success. The provider organizations have to develop different infrastructure for each contract. This is very wasteful and frustrating for the providers. As CMS moves forward with ACO implementation it is important to begin to develop a common methodology for calculating shared savings and eventually risk contracting. I'm not suggesting common pricing but a set of common payment methods which we all play by. We don't need to add more waste to an already bloated industry.

To read the report, click here - Total Cost of Care Contracts Early Lessons June 2011