Health spending 3.3 percent less under Blue Cross global payment plan, study finds

The largest private-sector effort to tame medical costs in Massachusetts appears to be getting results, as doctors given a budget to provide all their patients’ care have switched to less-expensive imaging and lab companies and expanded their office hours to reduce emergency room use.

Health spending for patients treated through the Blue Cross Blue Shield of Massachusetts program was 3.3 percent less in 2010 than for patients whose physicians were paid the traditional way—receiving a separate fee for every office visit, test, and procedure. At the same time, the 4,800 doctors in the insurer’s “global payment” program scored higher on measures of quality of care, according to research published Wednesday.

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The study, led by Boston researchers and published online by Health Affairs, bolstered hopes in the health care industry that the approach will play a key role in controlling health spending. President Obama’s health care law establishes a similar budget payment program for Medicare providers, and Massachusetts lawmakers are pushing the same strategy in legislation they plan to finalize this month.

“This is extremely encouraging,’’ said Paul Ginsburg, president of the Center for Studying Health System Change, a non-profit research organization in Washington, D.C., that was not involved in the study. “It shows the potential of this whole approach to eventually save on (insurance) premiums.’’

In the Blue Cross program, called the alternative quality contract, physicians and sometimes their affiliated hospitals accept an annual budget to care for a large group of patients, adjusted for how healthy the patients are, regardless of how many tests, appointments, and procedures they get. If doctors exceed the budget, they owe Blue Cross money; if doctors come in under budget, they split the proceeds with the insurer.

Physicians also earn bonuses of 2 percent to 10 percent of their budget for providing good care. Blue Cross monitors quality indicators such as whether doctors control patients’ high blood pressure and prescribe appropriate and timely depression medications. Compared to the control group, doctors in the alternative contract improved care for chronically-ill adults and preventive care for both adults and children more quickly.

In a previous study, the same researchers found that for doctors participating in the Blue Cross program in 2009, spending was 1.9 percent less than for doctors who were not participating. Those savings not only expanded in 2010, the program’s second year, but some doctors groups’ spent as much as 10 percent less than colleagues paid under the traditional fee-for-service system.

“That’s a really big number,’’ said Dana Gelb Safran, a senior vice president at Blue Cross and a professor at Tufts University School of Medicine who worked on the study. And the physicians reduced spending “in a really smart way,” she said.

Doctors generally did not disrupt existing relationships between patients and specialists or hospitals, even if they were high-priced, she said. Instead, they switched to lower-cost providers when the particular caregiver mattered less to patients, such as for scans. “They aren’t doing the radical things people feared they would,’’ she said.

In addition, doctors also reduced the amount of medical care their patients used. They did this by better managing chronically ill patients to avoid hospital stays and offering extended office hours for urgent care rather than directing patients to emergency rooms.

State Senate and House leaders are negotiating a compromise bill to control health care costs. Each passed its own legislation earlier this year, with the House bill containing more regulation of providers. While some industry leaders argued that the Health Affairs study proves regulation is unnecessary to save money, Representative Steven Walsh,a Lynn Democrat who is overseeing the House’s efforts, said the results bolster the House plan to push the market toward budget-type payments.

The bill encourages providers to move away from fee-for-service medicine, which is seen as promoting unnecessary care.

“This proves that if doctors manage chronically ill patients regularly and move to global payments you can save money,’’ he said.

The researchers cautioned that the study has limitations. Total payments by Blue Cross to the doctors continued to grow at the same rate as for doctors not under the alternative contract, because of the bonus payments for improved quality. But Safran said that by the end of the fifth year of the contract, she expects that the total amount of money paid by Blue Cross to these groups will be about the same as general inflation. This is because the doctors’ budgets are allowed to grow less each year.