Blue Cross and Blue Shield of Massachusetts wants to expand its use of global budgets outside of managed care. But the plan's success will depend on how many doctors are willing to accept the risk.
Doctors across the country have criticized Medicare's accountable care contracts that make physicians responsible for curbing health spending without allowing them to influence where and when patients get care. But the Massachusetts Blues in recent weeks began to approach the state's medical groups with a similar proposal.
The company plans to introduce global budgets in its preferred provider organization health plans. The new model comes seven years after the insurer first offered global budgets in its managed care plans under what it calls Alternative Quality Contracts.
Deborah Devaux, the Massachusetts Blues interim chief strategy officer, said it's not yet clear how many providers will be interested. The PPO plans have roughly 615,000 enrollees, and roughly one-third of the network contracts must be renewed before January 2016.
Medical groups that adopt the model will be rewarded if they keep patients' medical costs below budget. Most doctors in the Massachusetts Blues HMO networks already have global budgets, and the Massachusetts Blues carrier believes expanding them to its PPOs could strengthen incentives for physicians to tightly manage costs. It might also mitigate the confusion that providers experience by operating under different contracts with conflicting incentives.
But doctors' ability to manage costs is weaker under PPO plans, and they would lose money if they fail to keep spending under the budget. Providers who are turned off by that risk can choose to continue participating in the company's PPO networks under fee-for-service contracts that pay them for each test, office visit and procedure.
Managed care plans—or health maintenance organizations—require that patients seek care within a network and select a primary-care doctor who must provide referrals to specialists. Doctors saved 6.8% in the first four years of Massachusetts' global budget HMOs, researchers reported last year in the New England Journal of Medicine. Among medical groups that joined after the first year, savings averaged 8.8% through 2012.
But PPOs—an increasingly popular option in Massachusetts—give patients far more freedom. Patients are not required to select a primary-care doctor. The networks are typically broader, and patients can get care outside the network for higher deductibles or copays.
Massachusetts providers say they have significant questions they need answered before they are ready to commit.
“How do we know who the patients are?” asked Dr. Richard Nesto, executive vice president and chief medical officer of Lahey Health, a health system based in Burlington, Mass.
Because patients do not select a primary-care physician, doctors won't always know which patients are "assigned" to them for the purposes of calculating their performance under the contract.
Another is big question is whether they can manage care for patients without primary-care doctors acting as gatekeepers. Because patients do not need referrals, physicians will have less influence over which specialists, hospitals or diagnostic laboratories patients visit—and therefore less opportunity to reduce the cost of care.
The challenges are significant but not insurmountable, said experts and Massachusetts medical group executives.
“Absolutely it can work,” said Dr. Bruce Landon, a health policy professor at Harvard University who has studied the Massachusetts Blues global budget HMO contracts. Medicare accountable care, underway for three years, operates with some of the same freedom for patients as commercial PPOs, he said. Early results from Medicare accountable care have shown some favorable results.
But it's unclear whether PPOs can achieve the same results as HMOs with the alternative Blues contracts, Landon said. The insurer will likely introduce new incentives or limitations for patients to give doctors more leverage to manage costs and quality, he said.
Devaux, however, said the company sees no need to change enrollees' benefits to steer them to a primary care physician. An analysis of its PPO enrollees, she said, shows that they often return to one physician. “Most members do have a physician of choice,” she said. The analysis also compared patterns of specialty care between PPO patients and HMO patients who must seek a referral from their primary-care doctor. The patterns were largely the same, she said.
Based on that analysis, the company has devised a formula for determining which patients will be assigned to a particular medical group's global budget.
Providers participating in Medicare's large test of accountable care organizations under the Shared Savings Program have said they struggle to manage costs without knowing up front which Medicare beneficiaries are assigned to their ACO. Just this week the CMS Innovation Center announced a new ACO test that would address that criticism by allowing ACOs to recruit patients rather than having Medicare assign them based on where they seek care.
Christina Severin, CEO of Beth Israel Deaconess Medical Center's ACO, said the organization, which participates in Medicare's Pioneer ACO program, can handle that aspect of the Blues contract because its providers are accustomed to competing for patient loyalty and referrals by working to increase the ease and continuity of case.
Lahey's Nesto said the health system would try to leverage its integrated network and investment in electronic records to make it easy for patients to stay within its network. “I could make a good argument that I know a great doctor and I can get the information to them in a couple of seconds."
Follow Melanie Evans on Twitter: @MHmevans