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This week’s blog is brought to you by Dr Tim Wilson, 3V Managing Director.

Full reference:

Health Care Spending, Utilization, and Quality 8 Years into Global Payment

Song, Z., Ji, Y., Safran, D. G., & Chernew, M. E. (2019). Health Care Spending, Utilization, and Quality 8 Years into Global Payment. New England Journal of Medicine, 381(3), 252–263.

Web Link to Paper

Authors conclusion:

During the first 8 years after its introduction the Alternative Quality Contract of Blue Cross Blue Shield (BCBS) of Massachusetts, a population-based payment model, was associated with slower growth in medical spending on claims, resulting in savings that over time began to exceed incentive payments. Unadjusted measures of quality under this model were higher than or similar to average regional and national quality measures.

3V bottom line:

Perverse incentives through poor payment systems (like Payment by Results in England or Fees for Service) reward behaviours that lead to low value care. This paper confirms that alternative payment systems can help, but are certainly not the panacea for change…a new culture is.

3VH – Implications for value:

This is an important study, tracking the introduction of a payment system that has received global attention, the Alternative Quality Contract (AQC).

The US system is largely dominated by fee for service, the more a provider does, the better. This creates all sorts of perversities in the provision of healthcare, including the creation of supplier driven demand as shown by the team in Dartmouth Institute. So, this new contract- a capitated payment to providers with financial rewards and penalties for over and under spending, with additional quality payments.

Compared with populations in region, and nationally, the AQC led to:

  • A lower rise in annual spending that in the comparator group- 11.7% or $461
  • In the AQC group, spending increased by 16% over the study period, whilst in the comparator group, spending increased by 31%
  • However, the control group had lower spending at the start, perhaps indicating unmet need. In the end, absolute spending was 3% higher in the control group.
  • The longer an individual was enrolled on the new contract, the greater the savings were
  • Most quality indicators, including preventative care, improved more in the AQC group
  • There were greater declines in radiology and laboratory testing in the AQC group

So, overall the results were promising but not perhaps as remarkable we might be expected. Spending increased in both groups from a very high global base, and the study and control group only differed by 3% in the end. Further, quality improvements and reductions in testing were seen in both groups, albeit more in the AQC group.

What are we to take from this? Payment systems do need to change if health systems are to improve population value. But given constrained resources, for instance the global clinical workforce shortage, the evidence from this study is that new contract and payment mechanisms are insufficient.

Sustainability is going to require a new culture of stewardship, and the creation of networks working across organisations to make better use of finite resources.