Michigan's fee-for-value physician incentive program reduces spending and improves quality in primary care

As policy makers and others seek to reduce health care cost growth while improving health care quality, one approach gaining momentum is fee-for-value reimbursement. This payment strategy maintains the traditional fee-for-service arrangement but includes quality and spending incentives. We examined Blue Cross Blue Shield of Michigan's Physician Group Incentive Program, which uses a fee-for-value approach focused on primary care physicians. We analyzed the program's impact on quality and spending from 2008 to 2011 for over three million beneficiaries in over 11,000 physician practices. Participation in the incentive program was associated with approximately 1.1 percent lower total spending for adults (5.1 percent lower for children) and the same or improved performance on eleven of fourteen quality measures over time. Our findings contribute to the growing body of evidence about the potential effectiveness of models that align payment with cost and quality performance, and they demonstrate that it is possible to transform reimbursement within a fee-for-service framework to encourage and incentivize physicians to provide high-quality care, while also reducing costs.