No Prescription Impact from a Switch to Global Budgeting


Combined with a pay-for-performance program, global budgets put provider organizations at risk of incurring medical expenses above a predetermined amount.

Global budgeting has drawn attention as a current approach to control healthcare spending.

Often paired with a pay-for-performance program, as in the Centers for Medicare & Medicaid Services (CMS) Accountable Care Organization model, the global budget approach puts provider organizations at risk of incurring medical expenses above a predetermined amount. The goal is to hold providers accountable by giving them a monetary incentive to help an entire patient population collectively make the most cost-effective healthcare decisions.

A study published in INQUIRY: The Journal of Health Care Organization, Provision, and Financing reported how global budgeting impacts prescription utilization and spending when Blue Cross Blue Shield of Massachusetts (BCBSM) implemented its Alternative Quality Contract (AQC) in 2009.

Previous studies had shown that AQC reduced total spending in its first 2 years by (1) shifting referrals to lower-paid providers, and (2) reducing medical utilization. Looking specifically at pharmacy this time, authors of the INQUIRY article sought to evaluate how AQC affected prescribing patterns and drug costs.


Researchers identified a total sample of 1,381,399 members of BCBSM’s health maintenance organization (HMO) or point-of-service (POS) program, continuously enrolled with prescription coverage for at least 1 year.

They were divided into an intervention group, whose primary care physicians (PCPs) joined the AQC in 2009, and a control group, whose PCPs did not. Their pre-intervention period was 2006 through 2008, while the post-intervention period was 2009 through 2010.

Drug spending and utilization were calculated in 4 categories:

  • all branded drugs
  • all generic drugs
  • drugs for conditions in the AQC quality-incentive
  • drugs not included in the AQC quality-incentive

Drug classes in the AQC quality-incentive, which were analyzed separately, included cholesterol-lowering agents, oral diabetes drugs, anti-depressants, anti-hypertensives, and smoking cessation medications.

Variable regression used the same 84 condition categories that CMS uses for its Medicare Part D risk adjustment scores. Investigators utilized propensity weights when estimating 3 models for each dependent variable: a logit model (probability of utilization), a Poisson model (number of scripts), and an exponential model (drug spending).

Independent variables included patient age, gender, and risk score.

Findings on Prescription Use within Global Budgets

Researchers found no significant difference in spending trends across intervention and control groups prior to AQC. When all drug classes were examined, they found no significant impact of the AQC on drug use or spending.

Slight changes were detected by this study. For AQC enrollees, pharmacy utilization fell 0.83% compared with the control group (95% CI), number of scripts fell by 0.21% (95% CI), and drug spending fell by 0.18% (95% CI), but none of those estimated effects were statistically significant.


Introducing global budgeting, paired with a sophisticated pay-for-performance program, did not significantly reduce patient access to medications. Researchers acknowledged that accountable care targets were set over the duration of a 5-year contract, and that changes over that period remain to be seen.

The success of accountable care models will depend on first identifying clinically inefficient care, then addressing it, the authors wrote.

The report offered some possible reasons why prescription drugs were not an early target of providers’ cost containment efforts within the AQC program:

  • Quality bonuses to providers may encourage them to use medication therapy to achieve positive outcomes for conditions like hypertension and high cholesterol
  • In some cases, drug therapy offsets more costly medical care
  • Provider groups seem to prioritize other types of spending to abide by global budgets
  • BCBSM insurance coverage already encouraged generics use pre-intervention, so the intervention may have had little room for improvement.

In other words, pharmacy services may be clinically efficient as they are, without a global budget.

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