Payers around the country are employing new contracting methods with the dual hope of achieving lower costs and improving outcomes for their members. These advancements are taking place ahead of Medicare's shift to value-based purchasing.

The Massachusetts Blues plan has been promoting its Alternative Quality Contract since 2009. It's a per-patient global payment in which providers share savings from efficiency gains. They also can achieve a 10 percent bonus payment for meeting certain quality benchmarks. In neighboring Rhode Island, nearly 90 percent of the state's hospitals have signed onto Blue Cross & Blue Shield's Hospital Quality Program, which holds them accountable for meeting a specific set of quality measures.

The Rhode Island scenario is somewhat unique because a major impetus for the new contract came from state regulators. Under a directive from the state health insurance commissioner, guaranteed annual updates are limited to the Medicare marketbasket. The regulation, however, encourages insurers to offer hospitals increased payments for attaining mutually agreed-upon performance metrics.

"The guaranteed rate increases are pretty small," explains Gus Manocchia, M.D., BCBSRI's senior vice president and chief medical officer. He says that the quality program is a way to offer hospitals a higher reimbursement, but it also puts a significant portion of dollars at risk. If hospitals fail to meet quality benchmarks, they'll only get the modest inflationary update. Significantly, the program's measures are heavily weighted toward transitions of care: 60 percent of a hospital's score is tied to discharge planning. The other 40 percent is split evenly between scores for specific conditions and patient satisfaction. The growing problem of readmissions and the poor continuum of care most patients face are partly why the program is so heavily weighted toward discharge planning, Manocchia says. But the state also had some influence.

Through a collaborative effort that included insurers and providers, the state quality improvement organization developed a program called Safe Transitions, which provides tools for improving patient handoffs and discharge planning.

For health systems like Lifespan, the increased attention to the care continuum was in line with its strategic goals of improving care for all patients, says Mary Reich Cooper, M.D., senior vice president and chief quality officer of the five-hospital system. She says the system's ambitious information technology plan has played a major role in improving the discharge process. Physicians must sign off on a continuity-of-care document before a patient can be discharged. That electronic record includes such vital information as medication reconciliation and is sent electronically or faxed to the next provider. Lifespan staff also work with patients to ensure that their follow-up care is in place, going so far as to set up the appointments.

Hospital executives who have not yet entered into quality or value-based contracts should be gearing up nonetheless, advises James Smith, senior vice president, the Camden Group. He says hospitals should work with insurers to determine which measures will be included and to ensure that they can collect the data in or as close to real time as possible.