From: Health Affairs <>
Date: Thu, Jun 20, 2013 at 4:37 PM
Subject: Health Affairs Wins AcademyHealth’s ‘Article-of-the-Year’ Award

AcademyHealth has chosen a Health Affairs article as its 2013 Article-Of-The-Year!

The ‘Alternative Quality Contract,’ Based On A Global Budget, Lowered Medical Spending And Improved Quality
By Zirui Song, Dana Gelb Safran, Bruce E. Landon, Mary Beth Landrum, Yulei He, Robert E. Mechanic, Matthew P. Day and Michael E. Chernew
Web First July 11, 2012; print August 2012


The ‘Alternative Quality Contract,’ Based On A Global Budget, Lowered Medical Spending And Improved Quality

By Zirui Song, Dana Gelb Safran, Bruce E. Landon, Mary Beth Landrum, Yulei He, Robert E. Mechanic, Matthew P. Day and Michael E. Chernew
Health Affairs, August 2012


Seven provider organizations in Massachusetts entered the Blue Cross Blue Shield Alternative Quality Contract in 2009, followed by four more organizations in 2010. This contract, based on a global budget and pay-for-performance for achieving certain quality benchmarks, places providers at risk for excessive spending and rewards them for quality, similar to the new Pioneer Accountable Care Organizations in Medicare. We analyzed changes in spending and quality associated with the Alternative Quality Contract and found that the rate of increase in spending slowed compared to control groups, more so in the second year than in the first. Overall, participation in the contract over two years led to savings of 2.8 percent (1.9 percent in year 1 and 3.3 percent in year 2) compared to spending in nonparticipating groups. Savings were accounted for by lower prices achieved through shifting procedures, imaging, and tests to facilities with lower fees, as well as reduced utilization among some groups. Quality of care also improved compared to control organizations, with chronic care management, adult preventive care, and pediatric care within the contracting groups improving more in year 2 than in year 1. These results suggest that global budgets with pay-for-performance can begin to slow underlying growth in medical spending while improving quality of care.

From the Discussion

In year 1, total Blue Cross Blue Shield payouts to groups in the contract probably exceeded savings under the global budget. In year 2, savings achieved by the intervention group were generally larger than the surplus payments received. However, total payments to groups from Blue Cross Blue Shield of Massachusetts, including surplus sharing, quality bonuses, and infrastructure support, probably exceeded the savings achieved by most groups that year. This outcome reflects the design of the contract, which set targets based on actuarial projections to save money over its five-year duration, accounting for anticipated quality bonuses and other payments.

In addition, health care spending growth in Massachusetts slowed in this period as a result of general economic factors.

This model is informative for the broader movement toward accountable care organizations.

Published response:

Misleading Title And Abstract

By Kip Sullivan

In this article about the effect of the Alternative Quality Contract (AQC) administered by Blue Cross Blue Shield of Massachusetts (BCBS), the authors reported savings in what they variously referred to as “medical spending” and just “spending,” but they also reported that non-medical payments to providers (“surplus sharing, quality bonuses, and infrastructure support”) “probably” exceeded the savings in medical spending. They concluded: “Our findings do not imply that overall spending fell” (p. 1891).

In an earlier paper published in the New England Journal of Medicine, these authors offered the identical caveat.

Despite the authors’ warnings, Health Affairs’ editors permitted the phrase “lowered medical spending” to appear in the title of the paper, they permitted the unadorned word “spending” to appear numerous times in the abstract and text, and they failed to include in the title or the abstract the warning that “overall spending” (medical plus nonmedical costs) probably rose. This combination of errors was extremely misleading.

Health Affairs’ editors compounded these errors by permitting authors of two papers published in the next edition (the September edition) to make misleading statements about Song and colleagues’ article. Citing them, Markovich asserted that the AQC “slowed the…growth in medical spending” (p. 1974), and Sood and Higgins claimed the AQC has “demonstrated…a slowdown in the growth rate of health care spending” (p. 2043). Neither paper warned readers that medical spending is not synonymous with total spending, and that BCBS’s total spending may have gone up.

In a letter to the editor published in the November edition of Health Affairs, Rachel Nardin et al. criticized Song et al. for inserting “lowered medical spending” into the title when in fact total spending probably rose. In their reply, Song and Chernew agreed that “total payments are important” and that they probably rose. But rather than simply conceding that their title and abstract were misleading and that a few simple edits would have fixed the problem, Song and Chernew presented an illogical justification for confusing readers about the difference between medical and total spending. They argued that the need to know how providers respond to the AQC somehow justifies conflating medical with total spending. There is no justification for such an easily avoidable error.

Finally, I note that Song et al. made no effort to measure the cost to the providers of participating in the AQC, or if they did, they did not inform their readers of the outcome of this effort.

The three Health Affairs articles I have cited here are not isolated examples of scholars and editors downplaying or totally ignoring administrative or intervention costs and blurring the distinction between medical and total spending. This problem has plagued the health policy literature for four decades. It reached epidemic proportions in the 1990s.

There is an illogical but widespread assumption within the health policy community that if an intervention, such as the AQC, lowers medical spending, it must also have lowered total spending. But interventions designed to change provider behavior, be they HMOs, pay-for-performance schemes, electronic medical records, utilization review, or “medical homes,” are not free. They create new costs for both insurers and providers. Ignoring these costs, or obscuring them by celebrating reductions in medical spending and saying little or nothing about increases in total spending, should be no more acceptable than ignoring the side effects of drugs and procedures.…


Medical Spending And Global Budgets

By Rachel Nardin, David Himmelstein and Steffie Woolhandler
Health Affairs, November 2012

The title of the article by Zirui Song and colleagues (Aug 2012) claims that “The ‘Alternative Quality Contract,’ Based on a Global Budget, Lowered Medical Spending and Improved Quality.” But the Alternative Quality Contract (AQC) only lowered spending if you accept the authors’ idiosyncratic definition of the term medical spending.

In calculating medical spending, the authors exclude three categories of payments that Blue Cross Blue Shield of Massachusetts made to AQC providers: “surplus payments” to providers who kept fee-for-service billing below targets; bonuses for meeting quality goals; and special payments to support providers’ infrastructure to implement the AQC. The authors note, in passing, that these extra payments probably exceeded the “medical” savings. Unfortunately, they report no actual figures for the extra payments (although these figures were presumably available to the two coauthors who are executives at Blue Cross Blue Shield). In other words, Blue Cross Blue Shield’s total costs under the AQC went up by some undisclosed amount, not down.

Global budget payment strategies are currently being promoted as a way to lower total health care costs. The fact that the AQC failed to do this was probably overlooked by many readers and was clearly lost in media reports of these findings and hence in the policy debate.

The case for global budget payment strategies such as the AQC remains unproven.

The health policy community has hung its hat on accountable care organizations as being the be-all and end-all for reducing spending and improving quality in health care. Little does it matter that there is a dearth of objective evidence for this concept; they have continued to push it anyway in their support for the Affordable Care Act.

The ultimate gall of the policy community is shown in their selection of this article by Song et al, trumpeting the savings of this Massachusetts Blue Cross Blue Shield Alternative Quality Contract, when, buried in the article, we learn that the savings were burnt up by “surplus sharing, quality bonuses, and infrastructure support.”

Although the program costs, including additional administration, wiped out the medical savings, it is important to look at what the actual medical savings were. These savings were primarily due to “lower prices achieved through shifting procedures, imaging, and tests to facilities with lower fees.” There was virtually no accountable care magic here. They merely extracted better prices from some of the providers. At that, it was only 2.8 percent, a negligible amount when considering how much more effective publicly administered pricing is than pricing through private insurers. But, again, the all important bottom line is that this savings was lost through the non-medical costs of the program.

This AcademyHealth award should serve as a proxy for the compromised integrity that the policy community has shown in their efforts to push the highly flawed Affordable Care Act.

These authors, along with the Health Affairs editors who approved the misleading title, and the committee members who selected this article for the award are no doubt good people, but they did not have the courage to stand up and say, “This conclusion is (expletive deleted)!”

We know what they should have said: “Although we have shown that the promise of the accountable care organization is not fulfilled, nevertheless we do know how to control spending while improving quality and that is through the enactment of a single payer national health program.” But, no, they didn’t have the courage.