October 8, 2003
EXAMINING PROVIDER PAY-FOR-PERFORMANCE INCENTIVE PROGRAMS
The momentum behind the emerging trend toward provider pay-for-performance (P4P) programs comes from many sources, ranging from rising medical costs to purchasers' demands for more value for their healthcare benefit investments. Current provider reimbursement mechanisms allow, and even reward, defective care because they are unable to reward future benefit (see Health Affairs, March 2003).
Pay-for-performance incentive programs, on the other hand, are designed to align financial reward with improved outcomes. These programs differentiate payment among providers based on performance of quality and efficiency measures so that desired outcomes occur through changed behavior.
While relatively new on the payment scene, the concept is gaining support. According to the American Hospital Association (AHA), "valid, reliable, comparable, and salient quality measures have been shown to provide a potent stimulus for clinicians and providers to improve the quality of the care they provide."
Prevalence of P4P Programs
During an upcoming HFMA Audio Webcast, speaker Geoffrey Baker, president of Med-Vantage, Inc.®, shares results of a study by his firm of P4P programs. The study consisted of interviews with 29 executives and industry experts and a review of 40 P4P programs in 2003. More than 30 million beneficiaries participate in P4P programs sponsored by state governments, CMS, employer coalitions, and health plans. By 2006, the number of P4P sponsor organizations will increase to at least 80.
The study found that most P4P programs are in the early stages of market adoption; fewer than 10 programs had more than 5 years of operational experience. While most plans reported favorable experiences, P4P results were largely anecdotal and not reported publicly or peer reviewed. This is because most P4P programs are pilots.
Provider P4P participation is largely voluntary (for example, bonus-based) and mostly focused on primary care physician measures (for example, improving HEDIS scores, patient satisfaction, physician access, or electronic claims submission). Frequently, plans will pay incentives at the tax ID level, rather than the individual provider ID level.
Measurement in Provider Programs
Generally, P4P programs use a balanced report card format to report cost and quality results. The types of measures used for hospital P4P programs and the public reporting of hospital measure results were consistent among study participants. The majority of health plans and sponsor organizations use Leapfrog, JCAHO, National Quality Foundation, and/or CMS measures in their hospital P4P programs.
The study found that purchasers use four general categories for hospital incentive measures: safety, compliance with evidence-based medical practices, the use of clinical IT, and medical records.
EXAMPLES OF P4P HOSPITAL MEASURES |
| MEASURE |
DOMAIN |
| Computerized physician order entry (CPOE) system usage |
Clinical IT infrastructure |
| Nurse staffing ratios |
Safety |
| Monthly quality review of 25 randomly selected charts |
Quality improvement |
| Evidence-based hospital referrals |
Quality improvement,
Efficiency |
| Low complication rates |
Quality improvement,
Efficiency |
| Electronic submission of claims and patient eligibility verification |
IT connectivity |
| Use of intensivists or hospitalists |
Quality improvement,
Efficiency,
Reduced length of stay |
| JCAHO status |
Accreditation |
| Patient satisfaction |
Patient satisfaction |
| Aspirin at arrival and at discharge for acute myocardial infarction |
Condition management |
| Beta blocker at arrival and discharge for AMI. |
Condition management | |
Provider Acceptance: the Critical Success Factor
Provider acceptance is key to the success of a P4P program. To justify the time and cost to providers, P4P programs should:
- Be clinically relevant and defensible,
- Offer meaningful incentives that improve provider net margins,
- Provide sufficient patient volume to attract provider attention,
- Use measures that avoid heavy costs and administrative burdens, and
- Fund local provider education efforts.
Despite the many challenges that P4P programs face, their momentum appears to be building. Early pioneers have well-established, mature P4P programs. Now, a second generation of programs has emerged, including CMS's pilot programs for hospitals. This growing trend makes it important for healthcare financial managers to develop an understanding of P4P.
SOURCE:
HFMA Audio teleconference, "Provider Pay for Performance Incentive Programs: Do They Work? What Are the Lessons Learned?" by Geoffrey Baker, MBA, president of Med-Vantage® Inc, San Francisco. To be held October 22, 2003, 2:00 -3:45 p.m.
Additional Resources
- HFMA's Internet Guide to Pay for Performance Programs
- "The Business Case For Quality: Case Studies And An Analysis," by Sheila Leatherman, et.al., Health Affairs, Volume 22, Number 2. (Online abstract and purchasing information)
If you have questions or comments about HFMA Wants You to Know, contact editor Laura Noble .
HFMA Wants You to Know ISSN: 1540-0697. Volume II, Issue 21. Copyright 2003, Healthcare Financial Management Association. All rights reserved.