2009 CEO Forum

Paying for Performance:Experience, Evidence and

Future Prospects

Kananaskis, AlbertaFebruary 16, 2009

“There is abundant evidence that serious and extensive quality

problems exist throughout American medicine.”

Institute of Medicine

Leapfrog Reports Adherence To Its Four Measures

CMS is Reporting Quality Indicators on >4000 Hospitals

Public Reported HEDIS Measures have Often been Associated with Increasing

Quality of Care

HEDIS 2000

HEDIS 2006

Beta blocker after MI 85% 97%

Diabetic Hb Alc Testing 75% 88%

Cholesterol Screening 69% 82%*

Anti Depressant Tx Continuation 42% 45%

Breast Cancer Screening 73% 72%

Advising Smokers to Quit 66% 71%*2005

Improvements in Quality of Care For Medicare Beneficiaries

1998-99 to 2000-01 Were Small

1998-99 2000-01

Smoking Cessation Counseling 40% 43%

Aspirin at Discharge 85% 86%

ACE Inhibitor Therapy for CHF 71% 74%

Antibiotics in < 8 hours for pneumonia 85% 87%

Source: Jencks et al JAMA 2003, Jencks NEJM 2003

Four Forces that Underpin Support for Pay for Performance

• Changing views of quality of care and public reporting

• Promise of information technology

– Reduce errors and costs

– Facilitate population management

– System redesign and IT infrastructure are costly

• Lack of consensus on payment design

• Perception that paying for quality makes sense

Not Paying for Quality of Care is Un-American

King Hammurabi B.C.1795-1750

“If a doctor has opened with a bronze lancet an abscess of the eye of a gentleman and has cured the eye, he shall take ten shekels of silver”

“If a doctor has opened with a bronze lancet an abscess of the eye of a gentleman and has caused the loss of the eye, the doctor’s hands shall be cut off”

Existing Models Reflect Broad Range of Payment and Ambition

• Modest payments for a few discrete measures demonstrate concern about more than cost

• Large financial incentives to provoke redesign of systems and investments in IT

Example 1: Highmark Blue Cross (PA)

• Initially, rewards for process measures– diabetes, cancer screening, cholesterol screening, beta blocker treatment

• Rewards for satisfaction, electronic connectivity, access

• Physicians in the top 50% received variable rewards ranging from 1% bonus for 50th to 59th percentile to 5% for the 85th to 100th percentile

Example 2: Highmark Blue Cross (PA) 2007

• Payment based on accruing up to 115 Points

– Clinical Quality (65 pts ratings compared to specialty average for fifteen clinical indicators: mammograms, paps, asthma, diabetes, chf, flu shots )

– Generic prescribing 30 points

– Access (Non traditional office hours , QI activity, EMRs, E-prescribing—5 points each

• Sliding scale of rewards

– 65-89 points $3 per E and M Service

– 90-100 points $6 per E and M Service

– >100 points $9 per E and M Service

Example #3: PacifiCare

• Launched in July, 2003

• Initially, rewards for performance on 5 clinical measures (eg pap smears, mammograms, Hb A1C testing) and 5 measures of service quality

• Targets set at 75th percentile of performance from the previous year

• Bonus payment of $0.23 per member per month for each target met or exceeded—up to 10 payments

Example #4: PacifiCare-2006

• Targets

– 14 clinical measures (eg pap smears, mammograms, Hb A1C testing) 62.5%;

– 5 measures of service quality 26%;

– Information Technology (EMR, Dec support) 12.5%

• Sliding scale rewards set at 80th and 90th percentile of performance from the previous year

Example 5: British National Health Service

• Starting April, 2004 – The NHS provided higher pay to all family practitioners for quality of care

• 146 indicators

– Clinical Indicators for 10 conditions (e.g. HTN, CAD, DM)

– Organizational indicators (e.g patient records, education and training)

– Patient Experience—responding to patient surveys

• Performance data provided by FPs with Audits

• Payments averaged $40,000 per FTE FP in the first year

National Survey of 242 Health Plans on P4P

• 52% representing 81% of enrollees had programs to pay for performance

– 90% had P4P for physicians

– 38% had P4P for hospitals

Source: Rosenthal et al. N Engl J Med. 2006

How are Physician Pay for Performance Plans Structured?

Domains Included %

Clinical Quality 80%

Satisfaction 68%

Inf. Technology

Costs

68%

18%

Average Bonus %

< 5% 35%

≥ 5% 30%

Not sure 35%

Source: Rosenthal et al. N Engl J Med, 2006

Rewards for reaching fixed threshold most common (62%); Only 20% reward improvement

Federal Interest in Pay for Performance is Growing

Deficit Reduction Act 2006 established the building blocks

Mandates HHS to develop a plan for CMS to initiate P4P for hospitals by 2009

Provides financial incentive of 2% for hospitals to report quality measures to CMS

Medicare Improvements for Patients and Providers Act (MIPPA-2008) extends requirements for P4P to physicians and other professional services

Requires HHS to develop a plan for CMS to extend P4P to physicians with suggestions for legislation by May, 2010

Paying for Quality May Seem like Motherhood and Apple Pie But it is Not

• Will it work?

• What are the Challenges and potential Pitfalls?

• What developments are we likely to see going forward?

The Empirical Evidence on Paying for Performance is Minimal

• Petersen et al reviewed 17 studies between 1980- 2005

– Overall findings are mixed few strongly positive results

– 4 studies showed unintended effects such as adverse selection and improved documentation rather than delivery of care

• Data are lacking: P4P can work; P4P may fail

Source:Petersen et al Ann Intern Med, 2006

PacifiCare Program on Pay for Performance in California

• Launched in July, 2003

• Rewards for performance on 5 clinical measures (e.g. pap smears, mammograms, Hb A1C testing) and 5 measures of service quality

• Targets set at 75th percentile of performance from the previous year

• Bonus payment of $0.23 per member per month for each target met or exceeded—up to 10 payments

Improvement in Performance: CA (intervention) vs Pacific NW (control)

Pre-QIP Post-QIP Post-Pre

Pap Smears

California 39.2% 44.5% 5.3%

Pacific Northwest 55.4% 57.1% 1.7%

Column Difference (CA-NW) 16.2% 12.6% 3.6% *

Mammography

California 66.1% 68.0% 1.9%

Pacific Northwest 72.4% 72.6% 0.2%

Column Difference (CA-NW) 6.3% 4.6% 1.7%

Hb A/C Testing

California 62.0% 64.1% 2.1%

Pacific Northwest 80.0% 82.1% 2.1%

Column Difference (CA-NW) 18.0% 18.0% 0.0%

Improvement After the QIP and Payments by PacifiCare to California Groups with High, Middle, and Low Baseline Performance for Mammography

Baseline

Performance

PacifiCare Enrollment

Pre-QIP Rate

Post-QIP Rate

Improve-ment

Bonus

High (> 75th percentile)

557,000 72% 73% 1% $383,370

Middle (within 10 % of target)

385,000 65% 67% 2% $88,787

Low (more than 10% below target)

244,000 53% 59% 6% $987

CMS Premier Hospital Incentive Demonstration

• Voluntary program launched in Q4, 2003, 266 hospitals

• Rewards for performance on 33 indicators (Pneumonia, CHF, AMI, CABG, TKR, THR)

• Hospitals in top decile given 2% bonus; in second decile 1% bonus—average of $72,000

• Hospitals failing in year three to exceed performance of hospitals in the lowest two deciles as established in year one, penalized 1-2%

Improvement in Composite Measures of Quality for Hospitals engaged in P4P and

Public Reporting vs. Only Public Reporting

Source: Lindenauer et al., N Engl J Med, 2007

70

75

80

85

90

95

100

2003Q4

2004Q1

2004Q2

2004Q3

2004Q4

2005Q1

2005Q2

2005Q3

Pay for Performance Public Reporting

Baseline Performance and Improvement in Quality Among Hospitals Engaged in P4P

Pre-Period

Q4-2003

Post-Period

Q3-2005 Change

Quintile 5 70% 86% 16%

Quintile 4 78% 91% 13%

Quintile 3 81% 92% 11%

Quintile 2 85% 92% 6%

Quintile 1 91% 93% 2%

Source: Lindenauer et al., N Engl J Med, 2007

Five Challenges we face –and Some Strategies to Get out Ahead of the Curve.

Challenge #1 Budgetary Constraints Will Create Winners and Losers

• The financial incentives must be large to be effective

• Without new money in the system, some physicians will lose substantial funds and are unlikely to embrace the new payment systems

Challenge #2 : Adoption of Financial Incentives will be Accompanied by Wide Scale Public Reporting on

Groups and Individual Doctors

• Previously most reporting has been at the health plan level through HEDIS and the like

• Reports on individual doctors will raise questions about small numbers, case mix, and attribution

• Reports on individual doctors and groups may be more important than the financial incentives that engender them

25 52 80

A – 10th Percentile

C– 50th Percentile

B – 25h Percentile D– 75th Percentile

E– 90th Percentile

Challenge #3 Getting the Payment Formula Right

Distribution of Physicians’ Scores for Control of Patients’ High Blood Pressure

Challenge #4: Sutton’s Law--Going where the Money is

• Efficiency is a critical aspect of quality– Without cost savings we are unlikely to have enough

money on the table to motivate change– We lack well accepted measures of efficiency

• Eighty percent of Medicare expenditures reflect practice of specialists– We need an expanded arsenal of quality metrics for

specialty care

Challenge #5: Will Paying for High Quality Undermine Professionalism?

• Financial incentives may threaten professionalism

• Will patients worry when their doctors do not receive financial incentives for better quality?

Some Strategies to Move Ahead

1. Harness the power of profiling

2. Expand efforts, increase size of incentives as necessary, replicate successful models

– New money will be immensely helpful

3. Directing incentives at a few indicators will not likely lead to broad improvement in quality

– Rotate measures and expand the set

Moving Ahead (cont)

5. Redesign of office practice and investments in information infrastructure will be easiest to achieve in large practices– Other strategies will be particularly important to

pursue in solo and small group practice settings

6. Moderate expectations. – Other efforts to foster quality—educational programs,

computerized decision aids, incentives for patients—will remain important to pursue