Pay-for-Performance Programs: the U.S. Experience

Eric Schneider, M.D., M.Sc.Harvard School of Public HealthBrigham and Women’s Hospital

Boston, MA

“Market-oriented” strategies for health care: a 20-year journey

Performance Visibility

Performance Rewards

Peers PatientsPublic Purchasers

PerformanceFeedback

Market Share Payments &Penalties

“Report Cards” “P4P”

Public Reporting:Limited Evidence of Impact

• Cardiac surgery patients did not use risk-adjusted mortality results on hospitals, surgeons

• Consumers are often befuddled by report cards

• Scant evidence that consumers use health plan report cards to select plans

PATHWAY 1

Results(Performance)

Knowledge aboutPerformance

Knowledge aboutProcess and Results

Care Delivery Teams and

Practitioners

ChangeSelection

Measurement for Improvement

OrganizationsConsumersPurchasersRegulators

PatientsHealth Plans

CliniciansAccreditors

Selection & Accountability

Purpose of Measurement

Goals PATHWAY 2

Two Pathways to Quality Improvement

Motivation

$$$

The PAY in Pay-for-Performance

Medicare

$242 billion

Private Health

Insurance

$496 billion

Out-of-pocket

$206 billion

Medicaid

$224 billion

Other public

$180 billion

Other private

$76 billion

Total U.S. Health Expenditures (2001) = $1.4 trillion

Source: Katharine Levit, et al., “Trends in U.S. Health Care Spending, 2001,”Health Affairs (January/February 2003)

5%17%

16%

13%35%

14%

Private Payers: 242 U.S. Health Plans on P4P

• 71% had programs to pay for performance

• 68% had P4P for physicians

• 42% had P4P for hospitals

Survey Data, 2005

Private Health Plans: Expanding Scope of P4P

• Broad range of total dollars and ambition – Thinking about it

– Modest payments, a few specific measures

– Large payments, many measures, grants for IT

– Tiered networks

Public Payers: Many New Demonstration Projects Under Way• Centers for Medicare and Medicaid Services

– Premier Hospital Demonstration– Physician Voluntary Reporting Initiative

• Medicaid state agencies– Eleven state agencies using some form of P4P with

health plans– Center for Health Care Strategies (CHCS) recently

initiated P4P Purchasing Institute for Medicaid agencies

Premier Hospital Demo• 2003-2006• 278 hospitals participate voluntarily• 34 process and outcome measures

– Heart failure, heart attack, pneumonia, coronary artery bypass graft and knee replacements

• Hospitals can receive bonus based on performance– Top decile: 2% bonus on DRG payment for the condition– Second decile: 1% bonus

• Year 1 bonus incentive payments: – $900 to $847,000

P4P: Does it Work?Early Results Paint a Nuanced Picture

• Quality improved– Pre-post evaluations without control groups

• Quality improved slightly or not at all– Quasi-experiments with contemporaneous

comparison groups

• Success and failure appear related to many complex factors– Program design– Implementation

Factors Related to P4P Success and Failure

• Sponsor leverage in fragmented payment environments

• Amount of incremental revenue• Selection, scope, and perceived validity of

quality measures• Design of payout (low-performing

practices?)• Readiness of physician practices for QI• Effectiveness of QI innovations

Concerns about P4P in the U.S.

• Business model for development and maintenance of standardized quality and efficiency measure sets?

• Is the data infrastructure adequate for valid measures?

• How will “gaming” be addressed?• Is “new money” needed to retool MD practices?• Will P4P undermine professionalism?• Will P4P impede access and increase

socioeconomic disparities in quality?

Conclusions

• Pay-for-performance has captured attention

• First formal evaluations show mixed results

• Many questions remain unanswered, but funding for rigorous evaluation may be limited