Paying for Performance: Emerging Evidence and Insights

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Paying for Performance Emerging Evidence and
Insights

• Gary J. Young, J.D., Ph.D.
• Boston University School of Public Health
• and
• Center for Organization, Leadership and
• Management Research, Department of Veterans
  Affairs
• Doug Conrad, Ph.D.
• University of Washington School of Public Health

Financial support provided by Agency for
Healthcare Research and Quality and Robert Wood
Johnson Foundation
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What is Pay-for-Performance (P4P)?

• Financial incentive
• Predefined performance target efficiency,
  productivity, QUALITY
• Target recipient individuals, teams,
  organizations

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Over 100 P4P Programs with Quality Targets

• Examples
• Excellus/Rochester Individual Practice
  Association individual physicians
• Blue Cross of California (PPO) -- individual
  physicians
• Center for Health Care Strategies, Medicaid (CA)
  individual physicians and physician group
  practices
• Blue Cross Blue Shield of Michigan hospitals
• Centers for Medicare Medicaid Services
  Medicare participating hospitals and physician
  group practices

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Why P4P?

• Quality problems
• Escalating costs business case for quality
• Managed care not a silver bullet

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Will P4P Work?

• Evidence from manufacturing sector is promising
• Evidence from health care sector is both limited
  and mixed

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What do P4P Programs Look Like?
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P4P Quality Target

• Examples
• HbA1c testing threshold
• Diabetic eye exam threshold
• Mammography threshold
• Well-child visits improvement

• Chronic Conditions
• Primary care providers
• Process-oriented quality targets (HEDIS)

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P4P Target Recipient

• Group physician practice/IPA
• Hospitals
• Individual physicians

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P4P Financial Incentive Arrangements

• Cash lump sum bonuses
• Fee schedule adjustments
• PMPM bonus potential for total panel (e.g., 1.50
  PMPM 3.00 PMPM)
• Withhold adjustments
• Withhold/bonus hybrid

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P4P Payout Formulas

• Components
• Clinical quality measures (HEDIS, homegrown,
  outcome control)
• Utilization total medical expense trends
• Information systems
• Patient access and satisfaction
• Scoring
• Thresholds
• Improvement
• Rankings

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P4P Non-Financial Incentive Arrangements

• Honor rolls and handshakes
• Education resources and subscriptions
• Internal peer comparisons
• Public report cards

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Rewarding Results
REWARDING RESULTS DEMONSTRATION SITES UNIT OF ACCOUNTABILITY GEOGRAPHIC REGION
Blue Cross Blue Shield of Michigan Hospitals MI
Blue Cross of California Individual physicians San Francisco Bay area
Bridges to Excellence Individual physicians Group practices Cincinnati, OH Louisville, KY Boston, MA Albany, NY
Excellus/Rochester Individual Practice Association (RIPA) Individual physicians Rochester, NY
Pay for Performance Integrated Healthcare Association Group practices CA
Local Initiative Rewarding Results Center for Health Care Strategies Individual physicians Group practices CA
Massachusetts Health Quality Partners Group practices MA
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Blue Cross Blue Shield of Michigan

• Scope
• - 86 hospitals
• - 31 million dollars
• Quality targets
• - e.g., aspirin at arrival/discharge for AMI
• - e.g., left ventricular ejection fraction for
  CHF
• Incentive
• - DRG adjustment
• Payout formula
• - clinical quality 60, patient safety 30,
  community health 10
• - thresholds total score multiplied by 4

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Excellus/Rochester IPA

• Scope
• - ? 900 primary care physicians
• - 400,000 HMO enrollees
• - 17 million dollars
• Quality targets
• - care pathways for diabetes, asthma, otitis
  media,
• acute sinusitis, coronary artery disease
• Incentive
• - 50 to 150 of withhold (? 10 physicians
  annual income)
• Payout formula
• - clinical quality 40, utilization 40,
  patient satisfaction 20
• - forced rankings

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Integrated Healthcare Association

• Scope
• - 7 California health plans
• - 215 physician group practices
• - 6.2 million HMO commercial members
• - estimated 50 million dollars
• Quality targets
• - 8 clinical measures (e.g., pap smear,
  mammography )
• Incentive
• - annual payment to physician group practices
  PMPM
• Payout formula
• - clinical quality 50, patient satisfaction
  30, IT 20
• - forced rankings for quality and satisfaction
  payout based on percentile score (3 categories)

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Provider Attitudes Toward P4P

• Survey Over 2,500 randomly selected physicians
  in two demonstration sites
• - response rate 50 of 573 30 of 1,950
• Telephone interviews w/ physician practice
  leaders (3 sites 51 practices)

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Interviews w/Group Practice Executives

• Consistent attitudes about
• Adequacy of dollars (new or old money)
• Complex distribution formulas
• Data quality
• Turnover of quality targets
• Availability of technology
• Divergent attitudes about
• Awareness and involvement of physician
• Alignment of internal incentives

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Emergent Interview Themes from Health System
Leaders

• Organizational Strategy and Structure
• Organizational Stability
• Infrastructure
• Quality Measurement and Data
• Nature and Size of Incentives
• Sustainability of Interventions
• Institutional Culture

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Incentive Design Principles

• Principle 1 Create Broad-Gauged Incentives
• Structure
• Process
• Outcome

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Incentive Design Principle 2

• Use a Balanced Scorecard for Physician
  Incentives
• Helps Avoid Sub-Optimization by Providers
• Adds Credibility and Gravity to the Incentive
  Stimulus

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Incentive Design Principle 3

• Absolute Process Performance Standards Have
  Superior Incentive Properties
• Greater Provider Controllability, Less Dependence
  on Behavior of Other Providers
• Relative Performance Standards May Work Better
  for Outcome
• Standardize for Common External Factors
• Easier to Pre-Budget Total Incentive Payment

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Incentive Design Principle 4

• Physician Quality Incentives Must Be
• Transparent
• Timely
• Accurate
• Controllable (by providers)
• Consistent (across major payers and over time)

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Incentive Design Principle 5

• The Effect of Incentive Size Is Complex
• Must Be Sufficiently Large to Capture Provider
  Attention (Overcome Inertia) Cover Costs of
  Adjusting Behavior
• Must Not Be Too Large to Sustain over Time or So
  Large as to Erode Intrinsic Motivation of
  Providers

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Incentive Design Principle 6

• Channeling Patient Volume to High-Quality
  Providers Can be a Strong Indirect Financial
  Incentive for Quality
• If Channeled Services Have Sufficiently Positive
  Profit Margins
• In Market Areas with Sufficiently High
  Quality-Elasticity of Demand
• Reputational Incentives Must Be Defined Upfront

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Incentive Design Principle 7

• High-Quality Patient Care Is a Team Sport
• Accordingly, Teams Must Be Rewarded as a Part of
  Quality Incentive Programs
• Care Coordination Incentives Should Be Explicit
• Questions on Patient Satisfaction Are an
  Important Source of Perceptions regarding Care
  Coordination

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Incentive Design Principle 8

• Quality Incentives Should Form Part of an
  Integrated Quality Improvement Program
• Quality as a Strategic Organizational Imperative
• Strong Clinical and Managerial Decision Support
  for Quality Improvement (QI)
• Consistent, Credible Information Is Critical to
  Implementing and Maintaining QI