Thomas G' McGuire

1
Paying Physicians to Improve the Quality of Care

• Thomas G. McGuire
• Harvard Medical School

2
Means of Payment Affects Physician Behavior
Hickson et al. (1987). Physician
Reimbursement by Salary or Fee-for-Service
Effect on a Physicians Practice Behavior in a
Randomized Prospective Study, Pediatrics
80(3)344-350. pediatricians aggressively
scheduled visits when they were paid generously
by fee-for-service, in comparison to both
standards of care promulgated by the American
Academy of Pediatrics, and in comparison what
their colleagues with comparable patients were
doing when they were paid by salary 4.9 visits
per year vs. 3.8 visits per year.

• Epstein et al. (1986). The use of Ambulatory
  Testing in Prepaid and Fee-for-Service Group
  Practices Relation to Perceived Profitability,
  New England Journal of Medicine
  314(17)1089-1094.
• doctors in fee-for-service practice ordered
  50 percent more EKGs. Low-profitability tests
  were not elevated.

3
For breast cancer patients, a one-dollar
increase in a physicians reimbursement resulted
in the use of agents that cost twenty-three
dollars more.
4
Two Propositions
Money Matters
Only Money Matters
5
I come from America and am here to help you with
your health care system
Chaotic alternatives Cost
shifting Gaps in coverage 15 uninsured
DCGs, plan payment DRGs, hospital payment
RBRVS, physician payment Managed care
(D / C- )
(B / A- )
?P4P?
Grading the U.S. Health Care System (Achievement
/ Effort)
6
Most studies have failed to demonstrate any
significant effects on processes of care
(Rosenthal et al., 2005b Rosenthal and Frank,
2006). However, many of these reports used
incentives that only affected a small portion of
provider income. In general, however, as noted
above, a robust literature base demonstrating
that pay-for-performance strategies lead to
improved health outcomes does not yet exist
Recommendation 1 The Secretary of the
Department of Health and Human Services (DHHS)
should implement pay for performance in Medicare
using a phased approach as a stimulus to foster
comprehensive and systemwide improvements in the
quality of health care.
Pay for performance is not simply a mechanism to
reward those who perform well or to reduce costs.
Its purpose is to align payment incentives to
encourage ongoing improvement in a way that will
ensure high-quality care for all.
Pay for performance is not simply a mechanism to
reward those who perform well or to reduce costs.
Its purpose is to align payment incentives to
encourage ongoing improvement in a way that will
ensure high-quality care for all.
The current Medicare fee-for-service payment
system is unlikely to promote quality improvement
because it tends to reward excessive use of
services, high-cost, complex procedures, and
lower quality care.
7
Main Issues with P4P

• Sure it works but is it cost-effective?

8
Cost-Effectiveness of P4P
supply of immunization
Level of P4P
Payment
cost
Price
Immunization rate
effect
9
Inefficiencies of a Target P4P
Target e.g. 75
MC of Improvement
Rate of Immunization
10
Main Issues with P4P

• Sure it works but is it cost-effective?
• Unintended consequences multitasking and
  selection issues
• Is it fair/acceptable to physicians?

11
Unfairness in a Target Reward Systems
good doctors
not so good doctors
A
B
target
Performance
A Share of good doctors not being rewarded B
Share of not-so-good doctors being rewarded
12
Main Issues with P4P

• Sure it works but is it cost-effective?
• Unintended consequences multitasking and
  selection issues
• Is it fair/acceptable to physicians?
• Operational/data issues

13
A Snapshot of Pay-for-Performance in the U.S.

• Inventories of programs across all types of
  payers document more than 100 extant
  pay-for-performance programs
• In a national survey, 52 of HMOs (covering 81
  of enrollees) report using pay-for-performance

(Courtesy of Meredith Rosenthal)
14
How Are Pay-for-Performance Programs Structured?

• Physicians (medical groups) about twice as likely
  as hospitals to be target
• Average of 5 performance measures
• Maximum bonus 5-10 of pay for physicians, 1-2
  for hospitals
• Rewards for reaching fixed threshold dominate
  only 23 reward improvement

15
Design, Setting, and Participants We evaluated a
natural experiment with pay-for-performance using
administrative reports of physician group quality
from a large health plan for an intervention
group (California physician groups) and a
contemporaneous comparison group (Pacific
Northwest physician groups). Quality improvement
reports were included from October 2001 through
April 2004 issued to approximately 300 large
physician organizations. Main Outcome Measures
Three process measures of clinical quality
cervical cancer screening, mammography, and
hemoglobin A1c testing.
the California network demonstrated greater
quality improvement after the pay-for-performance
intervention only in cervical cancer screening (a
3.6 difference in improvement P
.02). Conclusion Paying clinicians to reach a
common, fixed performance target may produce
little gain in quality for the money spent and
will largely reward those with higher performance
at baseline.
16
Quality Improvement and Payments to Groups
with High, Middle or Low Baseline Performance
17
US Medicare P4P Demonstration

• The Centers for Medicare and Medicaid Services
  (CMS) selected 10 large physician groups in 2005
  to participate in Medicares first
  pay-for-performance initiative for physicians.
• Timeline April 1, 2005 ? March 31, 2008
• Diseases Diabetes (Y1) Congestive Heart
  Failure (Y2) Coronary Artery Disease
  (Y2) Hypertension and Preventive Care (Y3)

18
US Medicare P4P Demonstration (continued)

• The deal
• A participating physician group may earn a
  bonus of up to 80 percent of any Medicare
  cost-savings that it achieves that exceed 2
  percent of its expenditure target (the group is
  not penalized if it does not meet its target).
  The expenditure target is based on the practices
  own base-year costs inflated by the risk-adjusted
  annual expenditure growth rate for a comparison
  group of Medicare beneficiaries. If the PGP
  qualifies for a bonus, a portion (30 percent the
  first year and rising to 50 percent by the third
  year) is tied to the physician groups
  performance on quality targets. Medicare retains
  the remaining 20 percent of savings achieved by
  the PGP plus any bonus set aside for quality
  performance that is not earned by the PGP.
• Comments Process for assigning beneficiaries
  requires complex data algorithms mostly cost
  driven few quality measures can work only in
  large groups positive spillovers/multitasking
  issues?

19
Background This contract increases existing
income according to performance with respect to
146 quality indicators covering clinical care for
10 chronic diseases, organization of care, and
patient experience. Results The median reported
achievement in the first year of the new contract
was 83.4 percent Conclusions English family
practices attained high levels of achievement in
the first year of the new pay-for-performance
contract. A small number of practices appear to
have achieved high scores by excluding large
numbers of patients by exception reporting.
20
First Year of P4P for FP in UK
Assets National electronic data system
One-payer! Patients clearly
linked to doctors High Achievers On clinical
indicators (max 550) median was
532 (96.7 of max) Serious Money Average pay
went from 125k to 165k, with more in
store Comments impact not measured, but
trends can now be monitored pricey too easy?
stay tuned as good as it gets!

• Domains
• Asthma, Cancer, Chronic Obstructive
  Pulmonary Disease, Coronary Heart
  Disease, Diabetes, Epilepsy, Hypertension,
  Hypothyroidism, Mental Health, Stroke
• Examples

21
Assessing Promise of P4P

• US probably going nowhere
• UK/unified systems (?)
• The downside stalling on real change
• Any other bright ideas?

22
Costs Payments
Prospective Payment
A
fees
cost
C
fee lt cost
A
B
C
B
benefit
SC
SF
S
0
Services
23
Do We See Low Fees/ Capitation?

• Active/Passive Capitation systems Norway,
  Israel, Germany
• Retainer fees US Medicare/private
• Intermediary writing contract US California

24
Bases of Good Medical Service

• Somebody (some physician) takes responsibility
  for the patient
• Patients become equipped to make key choices
• Financing/payment system makes patients
  attractive to doctors