Private-payer ACOs good for Medicare, study says

Medicare may enjoy the fruits of the growing and varied work among private payers and providers to boost value in healthcare, though the benefits will come sooner to costs than quality, a study suggests.

The research, published in the Journal of the American Medical Association, examined the extent to which strategies that lower spending and improve quality for one group of patients would spill over and indirectly benefit other patients. The results show that spending dropped among patients who were not targeted by cost-control strategies, but few quality gains.

Harvard University researchers analyzed spending and quality measures for Medicare patients at 11 Massachusetts health systems with Blue and Cross Blue Shield contracts to manage costs and healthcare quality for commercially insured patients. Under these “alternative quality contracts,” which began in 2009 or 2010, spending fell by 1.9% during the first year and 3.3% during the second year for the commercially insured patients and quality improved.

The incentives for hospitals and doctors in the contracts are similar to ones in accountable care, an emerging model of healthcare financing and delivery that is being tested under the 2010 healthcare reform law. Accountable care incentives will increase—or erode—healthcare providers' bottom line based on the cost and quality of their services.

The work by the Harvard researchers suggests that providers have made fundamental changes to reduce spending, but have been more selective with their quality improvement strategies, said Dr. J. Michael McWilliams, an assistant professor of healthcare policy and medicine at Harvard University and one of the study's three authors.

Cost-saving measures may include alerts added to electronic medical records to discourage use of unnecessary imaging or laboratory tests, he said. Outpatient care, imaging and other tests were primary sources of savings for patients covered by the Massachusetts Blues alternative contracts.

McWilliams and Harvard University professors Dr. Bruce Landon and Michael Chernew found a similar trend among Medicare patients. Two years after entering the Blues' alternative contracts, overall spending for Medicare patients who received care from the same 11 organizations was 3.4% lower than expected, based on spending trends for the study's control group.

Two of seven quality measures showed improvement in the Medicare population—cholesterol screening among diabetics and the same screening among those with heart disease. Other measures, including readmissions to the hospital within 30 days of discharge and avoidable hospital visits, did not change.

McWilliams said that more widespread savings could signal a willingness among hospitals and medical groups to swiftly enter into contracts that reward them for lower-cost care.

Follow Melanie Evans on Twitter: @MHmevans