First groups sign on for new capitation model in Massachusetts

The contract includes per-member, per-month compensation with the possibility for quality-based bonuses.

By Emily Berry — Posted March 11, 2009

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The first Massachusetts physicians groups, including some of the state's largest, have agreed to work under a new type of capitated contract with Blue Cross Blue Shield of Massachusetts.

Tufts Medical Center, Mount Auburn Hospital and its affiliated physicians' group, and Hampden County Physician Associates, a western Massachusetts multispecialty group, all have signed what the Blues' calls its "alternative quality contract."

The new contracts announced in January are the first announcements of the Blues' efforts to update capitation, with changes including incentive pay linked to quality measures. Combined, the groups that have signed contracts will mean about 1,100 physicians working under the new model.

Although capitated contracts, which pay physicians on a per-member, per-month basis rather than fee for service, were once widespread, they fell out of favor in most of the country as physicians argued to plans that the flat rate did not meet the costs of delivering care, and that any savings from the stated goal of more preventive care went to the insurers.

The Massachusetts Blues announced last year that it would try to revive the idea, hoping that quality bonuses would allow physicians to share in the cost savings of preventive care.

The Massachusetts Medical Society so far has not taken an official position either for or against the new contracts.

The difference between the Blues' new contract and the old capitation model lies both in how the base pay rate is calculated -- based on cost -- and in the incentive pay based on quality scores -- up to 10% above and beyond their base payments under the new contract, said Deborah Devaux, senior vice president for community transformation at the Massachusetts Blues.

"That's very attractive to many providers," she said. "They do not want to be distinguished for cost and efficiency alone."

Devaux said Caritas Christi, a regional network of Catholic Hospitals, signed a letter of intent to work under the alternative quality contract and was working on the details of the arrangement as of late February. That would bring another 700 physicians under the alternative quality contract.

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