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Pay-For-Performance: The future of incentivized care
March 2006
Even with positive findings in the existing fee-for-service methodology, overall health expenditures have continued to increase, which is directly related to the demand for better technology and experienced personnel. There is also very little data that the increased expenditures related to medical technology advancement have positively impacted the quality of care being delivered.
In a P4P model, reimbursements for clinical services will be adjusted according to the quality of care that has been rendered. Currently, P4P programs offer incentives to physicians and hospitals to practice evidence-based standards, linking reimbursement bonuses to performance on a variety of measures. Most health plan administrators feel that these financial incentives should be non-punitive and reward only for positive outcomes. The total financial incentive is usually less than 5% of the total reimbursement. The healthcare community is in the infancy stages of moving to a unified (or standard) P4P model. Many private health insurers have created a patchwork approach that applies reimbursement levels that are directly linked to outcomes in clinical quality. Managed care providers are far ahead of CMS when it comes to the utilization of Pay-for-Performance incentives.
There are over 100 different P4P models or demonstration projects used among the private insures attempting to utilize a performance system in the United States today.1 Pay-for-Performance initiatives are not quite ready for standard implementation. First, P4P incentives must draw from a standard set of measures so that providers are not competing for revenue from the same source(s) using different metrics. Second, healthcare providers must develop an infrastructure that will allow the rapid and accurate capture of data so that reporting to regulatory bodies and payers is seamless. Third, financial incentives that are based on clinical outcomes could have implications for patient access, as those patients likely to produce the best outcomes could be selected for care while others are denied access entirely. As providers (both hospital and physicians) search for increased quality and financial opportunities, those navigating the healthcare system will need to become very familiar with the strategies employed in Pay-for Performance models.
Defining Pay-for-Performance Metrics Currently, there are performance measures (or metrics) in healthcare that have become widely adopted, though they are not standardized across all organizations. Hospital administrators and clinicians may recall several practice changes that were adopted in 2002. These changes were necessary to remain compliant with the newly-formed Joint Commission on Accreditation of Healthcare Organizations (JCAHO) Oryx initiative, more commonly referred to as the JCAHO Core Measures. The Oryx performance measures mirror many of the indicators that are being used today to determine quality performance of P4P programs.
Standardization of one set of performance measures is viewed as an essential next step in advancing P4P philosophies. In December, the Institute of Medicine (IOM) released a 300-page report that called for the adoption of a universal set of performance measures. Many believe that the healthcare industry across the board must be using the same tools and procedures, including a universal set of performance measures, in order for pay-for-performance to gain broad success. There is a valid argument that having different performance metrics across institutions or health plans will increase costs.
The IOM has suggested the collection of 22 measures in acute coronary syndrome, heart failure, pneumonia, smoking cessation, and surgical infection prevention. It is not surprising that these recommended areas of measurement are similar to the metric categories that have been established for the JCAHO Core Measure initiative. Any standardized measures would need to be validated before CMS and the medical and insurance communities can formally adopt them. There have been concerns raised that a standard set of performance metrics for the majority of hospital services would inundate the National Quality Forum with requests to validate performance measures for each of the clinical specialties.
If the IOM’s recommendations for performance measurement are adopted, then hospitals demonstrating compliance with the JCAHO Core Measures will have less difficulty demonstrating quality results in any future P4P program. Even with the most meticulous data collection methodologies in place, findings from several demonstration projects convey that P4P is complicated to implement. The foundation for effective P4P models is to ensure that standard measurements are used that are easily retrieved from data sources, thus allowing providers to be following a constant direction. Information Technology Investment “ Accurate and Efficient Data Capture Providers must plan on participating in P4P, especially given the increased popularity of this concept. Therefore, hospitals and physicians must be implementing clinical outcomes tracking systems now. Providers should be able to access their data using just-in-time reporting mechanisms so that decision-making is streamlined in lieu of potential negative outcomes. How do hospitals accomplish this monumental task of instantaneous data (or metric) reporting? Simple by having a well- developed Information Technology (IT) infrastructure that interfaces with clinical systems, as well as an electronic medical record. Hospitals with functional service lines in place will find that IT integration is a necessity for outcomes tracking. In fact, the movement to a service line (or product line) structure forces many institutions to generate service line Quality Dashboard reports that continuously aggregate data. In our experience, hospitals and physician practices that do not have a structured Dashboard reporting system usually have difficulty reporting both operational and clinical outcomes.
The United States government has set a goal for the healthcare system to develop and utilize an integrated electronic medical network for patients. Many hospitals have been slow in the movement to an Electronic Medical Record (EMR) due to the associated costs inherent to purchasing and implementing this new technology. Other hospitals have implemented EMRs with many staff members, particularly physicians, reluctant to use the new systems. Several of the P4P demonstration projects have shown that the additional financial incentives have prompted physicians and physician groups to embrace information technology and electronic medical records at a faster pace. The message is simple accurate and comprehensive data must be collected for the providers to be eligible for additional bonus payments. Only with an integrated use of electronic records can physicians and hospitals guarantee that their data is present for reporting. P4P Potential to Limit Patient Access The success of Pay-for-Performance initiatives is clearly dependent upon a provider’s ability to deliver quality care with positive patient outcomes. A successful P4P model can bolster better patient care, as well as increase revenue for both hospitals and physicians. It is evident that clinical outcomes are not always directly related to the skill and training of the front-line clinicians. Quality patient care comes with a price, though the necessary capital to deliver quality may not be available at all facilities. Therefore, quality at hospitals that typically care for the poor or underinsured may be far behind that of institutions with greater resources, because these facilities care for a population with a better payor mix.
Adequate space, functional equipment, modern technology and supplies, standardized processes and skilled personnel are the key ingredients for the delivery of quality healthcare. People typically associate quality care with the proficiency of the providers; however, poor performance can also be a reflection of a poorly-designed hospital space and inefficient patient flow processes. Redesigning or optimizing physical space or operating processes requires a significant capital investment that a facility with a poor historic payor mix may not be able to meet upfront. Second, the IT infrastructure that is necessary to aggregate and evaluate outcomes data (as has been previously discussed) may not be possible for hospitals in less affluent markets. Taking both of these factors into account reveals that providers may opt to care for patients or practice in an environment already demonstrating positive outcomes.
In the current P4P models, there is no adjustment in any financial bonus incentives to adjust for socioeconomic status of the target patient population. Socioeconomic status of the market is probably the most visible indicator of patient access to care. All hospitals are NOT equal. Hesitancy exists to widely adopt P4P because a hospital’s demographic attributes may determine where bonus incentives are allocated.
As increasing numbers of P4P models are implemented in programs across the country, payors will have to scrutinize financial incentives in order to ensure that bonuses are fair and equitable across specialties. For instance, it has been argued that greater numbers of incentives offered to physician specialists could make P4P more expensive for payors. Furthermore, in some service lines, access to care may become limited as proposed physician payment cuts incentivize physicians to drop out of the Medicare system. In cardiovascular (CV) services, this is unlikely due to the large number of Medicare beneficiaries with CV disease.
Clinicians could further limit access to care as patients are cherry-picked for those that will produce the best outcomes. Those patients with the greatest co-morbid conditions could be denied treatment in lieu of a reimbursement system that provides incentives based solely on positive clinical outcomes. This only adds to the fear that the best-performing hospitals/ providers will be able to maintain and grow key service lines while other organizations may have to eliminate those services entirely. Transparency of Outcomes Data- Program Tracking An attempt to know a hospital’s clinical outcomes has never been simpler with patient and physician consumers’ ability to access almost any hospital’s clinical performance through the Internet. Public-accessible websites, such as HealthGrades® and the Department of Health and Human Service’s Hospital Compare, offer a first-hand example of the ease with which hospital data can be obtained. This public disclosure of data has permitted all potential customers (and competitors) to view a hospital’s outcomes against key performance metrics.
The U.S. healthcare market has clearly entered an age of information and data transparency, which has caused a paradigm shift in the way data is collected and reported. Hospital quality rankings used to be derived solely from financial records because patient billing statistics were easily accessible. But over the last several years, quality measures have been directly extracted from clinical data. Much of the same information is collected, although via different means. Reporting agencies have traditionally pulled quality data from hospitals’ financial information, such as MedPar and UB92 patient bills, but recent trends show that hospitals more readily push their data to outside agencies for review.
There are now 24 states that require hospitals to report quality data. Seven have passed legislation to require public disclosure; transparency is on nearly everyone’s agenda. This ability to view hospital data was once thought to serve as a marketing tool and driver of internal performance improvement initiatives. It is now clear that this same data will likely be used to drive different levels of reimbursement. Even as early as 10 years ago, P4P initiatives would not have been likely in many regions due to a lack of quality data disclosure on any level.
In Pennsylvania, for example, public disclosure of hospital data is mandatory for open heart surgery. Hospitals in the state report charge information to the Pennsylvania Health Care Cost Containment Council (PHC4). The PHC4 was the first state council to publish reports displaying hospitals’ mortality rates, lengths-of-stay, costs and readmission rates. This reporting has not been without its own growing pains. The measurable differences in internal clinical hospital data and the billing data have been surprising. For example, the citizens of Pennsylvania were faced with a report that showed alarmingly high inpatient infection rates. Hospitals have contended that the reports are flawed because the data, which had been abstracted primarily from billing reports, could not account for where the infections were acquired or any type of risk adjustment.7 Program such as PHC4, other state initiatives, and several demonstration projects are the primary drivers of the P4P movement. CMS/Premier Pay-For-Performance Demonstration Project Private payers will typically base a large percentage of their reimbursement methodologies on practices that have been formally adopted by the CMS. Experts believe that Congress will push for a pay-for-performance methodology as part of Medicare reform. They will have to consider how much funding to allocate or just reallocate the same budgeted dollars to such a program under the prospective payment system. At present, Medicare has various initiatives to encourage improved quality of care in all settings where Medicare beneficiaries receive services. Medicare quality initiatives include projects that have been designed for hospitals, physician practices and disease management programs.
Supporters of the Pay-for-Performance initiative saw a major victory when CMS partnered with Premier, Inc. to develop a $21-million demonstration project related to a P4P reimbursement model. The CMS/ Premier demonstration model is perhaps the largest organized demonstration project to test pilot the P4P concept. Hospitals that are participating in the demonstration must have been participants in the Premier Perspective system as of March 31, 2003. Participation in the demonstration project is voluntary, with 278 hospitals currently enrolled. CMS is collecting data on 34 quality measures relating to five clinical conditions.
P4P payments will be based on rankings within the defined quality measures, and payouts will be tiered to correspond to achievement of a target threshold within those measures. Hospitals scoring in the top 10% for a given set of quality measures will receive the standard DRG payment with an additional 2% incentive. Those facilities scoring in the next 10% will receive a 1% bonus payment. According to CMS, hospitals that have lower performance among the selected measures (those performing in the lowest 10%) will be subject to reductions in payment if they do not meet target thresholds for quality.8 Controversy exists regarding punitive incentives for poor performance, i.e. should programs that do NOT reach minimum quality measures receive lower reimbursement?
Initial results from the CMS/ Premier demonstration project are yielding mostly positive results. Those hospitals that have participated have a noted increase in physician and staff behavior change. The demonstration facilities have also seen a positive trend in terms of clinical outcomes related to the measures. CMS formally announced that hospitals participating in the project yielded indicators that rose by approximately 7% after the implementation of the demonstration. Three of the five clinical conditions under measurement are related to cardiac services (acute myocardial infarction [AMI], coronary artery bypass grafting [CABG] and congestive heart failure [CHF]). In actuality, there are nine metrics being collected to measure a hospital’s performance related to the treatment of AMI (Table 1).
Further data is needed to determine if hospitals participating in the Premier project have yielded cost savings. Many physicians and hospitals believe that the current fee-for-service system is deeply flawed. Pay-for-performance benefits could prove insufficient to offset the losses sustained under a payment formula that does not adequately track physician practice costs. Physician Performance Incentives (PPI) - A P4P Model for the Future Existing P4P models distribute financial incentives (or cash flow) in two primary directions: from payor-to-hospital or payor-to-physician (Figure 1). We believe that programs that are early adopters of leading-edge payment models will experience the greatest benefits in patient outcomes and revenue. The future is unclear; however, there is a greater opportunity to utilize more adaptations of P4P models as hospitals wish to partner with physicians.
There is a new model of P4P that provides financial incentives directly from the hospital-to-physician (Figure 2). This model would use a standard set of quality measures across the hospital to benchmark physician and/or physician groups. It is referred to as the Physician Performance Incentive (PPI) approach.
The unique feature of PPI arrangements is that hospitals would have the ability to reward physicians for positive outcomes using evidence-based clinical indicators. For example, a cardiovascular surgeon, under a PPI arrangement with the hospital, will have five or six indicators defined and benchmarked internally and externally. The CV surgeon may use clinical indicators such as aspirin prescribed at discharge, CABG using internal mammary artery, inpatient mortality rate and post-operative hemorrhage or hematoma. Internal data would be used to benchmark the surgeon on his current statistics, and then by using a stepping matrix, would reward the physician as s/he meets the established goals. For example, $20,000 may be defined as the total bonus opportunity, with each individual goal at $4,000. The five goals would be specifically defined so that for each goal met, the surgeon would receive a payout no greater than the maximum of $20,000. Adding flexibility to the PPI arrangement may allow the parties to define their financial rewards based on individual or group practice outcomes.
This partnering model, an incentive-based reimbursement model for healthcare outcomes, must be reviewed for any legal issues present when implementing. Payments must be commercially reasonable and consistent with fair market value. When structuring any type of bonus incentive, it may not conflict with anti-kickback statutes or Civil Monetary Penalty (CMP) laws. In our discussions with healthcare lawyers, this type of partnership model has occurred in years past and should, if structured properly, be able to be implemented.
As consumers (patients and families) and the government continue to focus on the need for physicians and hospitals to provide high-quality patient care, P4P models will continue to grow and be enhanced. The trend of paying for services that do not include quality benchmarks has eroded for not only healthcare, but in other industries as well. For example, would you continue to use the same airline if you heard reports of continual maintenance issues when compared to their competitors? This simple example shows how quality must be a part of a new generation of healthcare. The question remains: should quality be expected or be rewarded, or both? As P4P gains acceptance, this question will continue to be examined from a variety of perspectives, with the goal of achieving fiscally-sound, high-quality care. To contact Corazon, please call (412) 364-8200 or visit www.corazon-consulting.com
In a P4P model, reimbursements for clinical services will be adjusted according to the quality of care that has been rendered. Currently, P4P programs offer incentives to physicians and hospitals to practice evidence-based standards, linking reimbursement bonuses to performance on a variety of measures. Most health plan administrators feel that these financial incentives should be non-punitive and reward only for positive outcomes. The total financial incentive is usually less than 5% of the total reimbursement. The healthcare community is in the infancy stages of moving to a unified (or standard) P4P model. Many private health insurers have created a patchwork approach that applies reimbursement levels that are directly linked to outcomes in clinical quality. Managed care providers are far ahead of CMS when it comes to the utilization of Pay-for-Performance incentives.
There are over 100 different P4P models or demonstration projects used among the private insures attempting to utilize a performance system in the United States today.1 Pay-for-Performance initiatives are not quite ready for standard implementation. First, P4P incentives must draw from a standard set of measures so that providers are not competing for revenue from the same source(s) using different metrics. Second, healthcare providers must develop an infrastructure that will allow the rapid and accurate capture of data so that reporting to regulatory bodies and payers is seamless. Third, financial incentives that are based on clinical outcomes could have implications for patient access, as those patients likely to produce the best outcomes could be selected for care while others are denied access entirely. As providers (both hospital and physicians) search for increased quality and financial opportunities, those navigating the healthcare system will need to become very familiar with the strategies employed in Pay-for Performance models.
Defining Pay-for-Performance Metrics Currently, there are performance measures (or metrics) in healthcare that have become widely adopted, though they are not standardized across all organizations. Hospital administrators and clinicians may recall several practice changes that were adopted in 2002. These changes were necessary to remain compliant with the newly-formed Joint Commission on Accreditation of Healthcare Organizations (JCAHO) Oryx initiative, more commonly referred to as the JCAHO Core Measures. The Oryx performance measures mirror many of the indicators that are being used today to determine quality performance of P4P programs.
Standardization of one set of performance measures is viewed as an essential next step in advancing P4P philosophies. In December, the Institute of Medicine (IOM) released a 300-page report that called for the adoption of a universal set of performance measures. Many believe that the healthcare industry across the board must be using the same tools and procedures, including a universal set of performance measures, in order for pay-for-performance to gain broad success. There is a valid argument that having different performance metrics across institutions or health plans will increase costs.
The IOM has suggested the collection of 22 measures in acute coronary syndrome, heart failure, pneumonia, smoking cessation, and surgical infection prevention. It is not surprising that these recommended areas of measurement are similar to the metric categories that have been established for the JCAHO Core Measure initiative. Any standardized measures would need to be validated before CMS and the medical and insurance communities can formally adopt them. There have been concerns raised that a standard set of performance metrics for the majority of hospital services would inundate the National Quality Forum with requests to validate performance measures for each of the clinical specialties.
If the IOM’s recommendations for performance measurement are adopted, then hospitals demonstrating compliance with the JCAHO Core Measures will have less difficulty demonstrating quality results in any future P4P program. Even with the most meticulous data collection methodologies in place, findings from several demonstration projects convey that P4P is complicated to implement. The foundation for effective P4P models is to ensure that standard measurements are used that are easily retrieved from data sources, thus allowing providers to be following a constant direction. Information Technology Investment “ Accurate and Efficient Data Capture Providers must plan on participating in P4P, especially given the increased popularity of this concept. Therefore, hospitals and physicians must be implementing clinical outcomes tracking systems now. Providers should be able to access their data using just-in-time reporting mechanisms so that decision-making is streamlined in lieu of potential negative outcomes. How do hospitals accomplish this monumental task of instantaneous data (or metric) reporting? Simple by having a well- developed Information Technology (IT) infrastructure that interfaces with clinical systems, as well as an electronic medical record. Hospitals with functional service lines in place will find that IT integration is a necessity for outcomes tracking. In fact, the movement to a service line (or product line) structure forces many institutions to generate service line Quality Dashboard reports that continuously aggregate data. In our experience, hospitals and physician practices that do not have a structured Dashboard reporting system usually have difficulty reporting both operational and clinical outcomes.
The United States government has set a goal for the healthcare system to develop and utilize an integrated electronic medical network for patients. Many hospitals have been slow in the movement to an Electronic Medical Record (EMR) due to the associated costs inherent to purchasing and implementing this new technology. Other hospitals have implemented EMRs with many staff members, particularly physicians, reluctant to use the new systems. Several of the P4P demonstration projects have shown that the additional financial incentives have prompted physicians and physician groups to embrace information technology and electronic medical records at a faster pace. The message is simple accurate and comprehensive data must be collected for the providers to be eligible for additional bonus payments. Only with an integrated use of electronic records can physicians and hospitals guarantee that their data is present for reporting. P4P Potential to Limit Patient Access The success of Pay-for-Performance initiatives is clearly dependent upon a provider’s ability to deliver quality care with positive patient outcomes. A successful P4P model can bolster better patient care, as well as increase revenue for both hospitals and physicians. It is evident that clinical outcomes are not always directly related to the skill and training of the front-line clinicians. Quality patient care comes with a price, though the necessary capital to deliver quality may not be available at all facilities. Therefore, quality at hospitals that typically care for the poor or underinsured may be far behind that of institutions with greater resources, because these facilities care for a population with a better payor mix.
Adequate space, functional equipment, modern technology and supplies, standardized processes and skilled personnel are the key ingredients for the delivery of quality healthcare. People typically associate quality care with the proficiency of the providers; however, poor performance can also be a reflection of a poorly-designed hospital space and inefficient patient flow processes. Redesigning or optimizing physical space or operating processes requires a significant capital investment that a facility with a poor historic payor mix may not be able to meet upfront. Second, the IT infrastructure that is necessary to aggregate and evaluate outcomes data (as has been previously discussed) may not be possible for hospitals in less affluent markets. Taking both of these factors into account reveals that providers may opt to care for patients or practice in an environment already demonstrating positive outcomes.
In the current P4P models, there is no adjustment in any financial bonus incentives to adjust for socioeconomic status of the target patient population. Socioeconomic status of the market is probably the most visible indicator of patient access to care. All hospitals are NOT equal. Hesitancy exists to widely adopt P4P because a hospital’s demographic attributes may determine where bonus incentives are allocated.
As increasing numbers of P4P models are implemented in programs across the country, payors will have to scrutinize financial incentives in order to ensure that bonuses are fair and equitable across specialties. For instance, it has been argued that greater numbers of incentives offered to physician specialists could make P4P more expensive for payors. Furthermore, in some service lines, access to care may become limited as proposed physician payment cuts incentivize physicians to drop out of the Medicare system. In cardiovascular (CV) services, this is unlikely due to the large number of Medicare beneficiaries with CV disease.
Clinicians could further limit access to care as patients are cherry-picked for those that will produce the best outcomes. Those patients with the greatest co-morbid conditions could be denied treatment in lieu of a reimbursement system that provides incentives based solely on positive clinical outcomes. This only adds to the fear that the best-performing hospitals/ providers will be able to maintain and grow key service lines while other organizations may have to eliminate those services entirely. Transparency of Outcomes Data- Program Tracking An attempt to know a hospital’s clinical outcomes has never been simpler with patient and physician consumers’ ability to access almost any hospital’s clinical performance through the Internet. Public-accessible websites, such as HealthGrades® and the Department of Health and Human Service’s Hospital Compare, offer a first-hand example of the ease with which hospital data can be obtained. This public disclosure of data has permitted all potential customers (and competitors) to view a hospital’s outcomes against key performance metrics.
The U.S. healthcare market has clearly entered an age of information and data transparency, which has caused a paradigm shift in the way data is collected and reported. Hospital quality rankings used to be derived solely from financial records because patient billing statistics were easily accessible. But over the last several years, quality measures have been directly extracted from clinical data. Much of the same information is collected, although via different means. Reporting agencies have traditionally pulled quality data from hospitals’ financial information, such as MedPar and UB92 patient bills, but recent trends show that hospitals more readily push their data to outside agencies for review.
There are now 24 states that require hospitals to report quality data. Seven have passed legislation to require public disclosure; transparency is on nearly everyone’s agenda. This ability to view hospital data was once thought to serve as a marketing tool and driver of internal performance improvement initiatives. It is now clear that this same data will likely be used to drive different levels of reimbursement. Even as early as 10 years ago, P4P initiatives would not have been likely in many regions due to a lack of quality data disclosure on any level.
In Pennsylvania, for example, public disclosure of hospital data is mandatory for open heart surgery. Hospitals in the state report charge information to the Pennsylvania Health Care Cost Containment Council (PHC4). The PHC4 was the first state council to publish reports displaying hospitals’ mortality rates, lengths-of-stay, costs and readmission rates. This reporting has not been without its own growing pains. The measurable differences in internal clinical hospital data and the billing data have been surprising. For example, the citizens of Pennsylvania were faced with a report that showed alarmingly high inpatient infection rates. Hospitals have contended that the reports are flawed because the data, which had been abstracted primarily from billing reports, could not account for where the infections were acquired or any type of risk adjustment.7 Program such as PHC4, other state initiatives, and several demonstration projects are the primary drivers of the P4P movement. CMS/Premier Pay-For-Performance Demonstration Project Private payers will typically base a large percentage of their reimbursement methodologies on practices that have been formally adopted by the CMS. Experts believe that Congress will push for a pay-for-performance methodology as part of Medicare reform. They will have to consider how much funding to allocate or just reallocate the same budgeted dollars to such a program under the prospective payment system. At present, Medicare has various initiatives to encourage improved quality of care in all settings where Medicare beneficiaries receive services. Medicare quality initiatives include projects that have been designed for hospitals, physician practices and disease management programs.
Supporters of the Pay-for-Performance initiative saw a major victory when CMS partnered with Premier, Inc. to develop a $21-million demonstration project related to a P4P reimbursement model. The CMS/ Premier demonstration model is perhaps the largest organized demonstration project to test pilot the P4P concept. Hospitals that are participating in the demonstration must have been participants in the Premier Perspective system as of March 31, 2003. Participation in the demonstration project is voluntary, with 278 hospitals currently enrolled. CMS is collecting data on 34 quality measures relating to five clinical conditions.
P4P payments will be based on rankings within the defined quality measures, and payouts will be tiered to correspond to achievement of a target threshold within those measures. Hospitals scoring in the top 10% for a given set of quality measures will receive the standard DRG payment with an additional 2% incentive. Those facilities scoring in the next 10% will receive a 1% bonus payment. According to CMS, hospitals that have lower performance among the selected measures (those performing in the lowest 10%) will be subject to reductions in payment if they do not meet target thresholds for quality.8 Controversy exists regarding punitive incentives for poor performance, i.e. should programs that do NOT reach minimum quality measures receive lower reimbursement?
Initial results from the CMS/ Premier demonstration project are yielding mostly positive results. Those hospitals that have participated have a noted increase in physician and staff behavior change. The demonstration facilities have also seen a positive trend in terms of clinical outcomes related to the measures. CMS formally announced that hospitals participating in the project yielded indicators that rose by approximately 7% after the implementation of the demonstration. Three of the five clinical conditions under measurement are related to cardiac services (acute myocardial infarction [AMI], coronary artery bypass grafting [CABG] and congestive heart failure [CHF]). In actuality, there are nine metrics being collected to measure a hospital’s performance related to the treatment of AMI (Table 1).
Further data is needed to determine if hospitals participating in the Premier project have yielded cost savings. Many physicians and hospitals believe that the current fee-for-service system is deeply flawed. Pay-for-performance benefits could prove insufficient to offset the losses sustained under a payment formula that does not adequately track physician practice costs. Physician Performance Incentives (PPI) - A P4P Model for the Future Existing P4P models distribute financial incentives (or cash flow) in two primary directions: from payor-to-hospital or payor-to-physician (Figure 1). We believe that programs that are early adopters of leading-edge payment models will experience the greatest benefits in patient outcomes and revenue. The future is unclear; however, there is a greater opportunity to utilize more adaptations of P4P models as hospitals wish to partner with physicians.
There is a new model of P4P that provides financial incentives directly from the hospital-to-physician (Figure 2). This model would use a standard set of quality measures across the hospital to benchmark physician and/or physician groups. It is referred to as the Physician Performance Incentive (PPI) approach.
The unique feature of PPI arrangements is that hospitals would have the ability to reward physicians for positive outcomes using evidence-based clinical indicators. For example, a cardiovascular surgeon, under a PPI arrangement with the hospital, will have five or six indicators defined and benchmarked internally and externally. The CV surgeon may use clinical indicators such as aspirin prescribed at discharge, CABG using internal mammary artery, inpatient mortality rate and post-operative hemorrhage or hematoma. Internal data would be used to benchmark the surgeon on his current statistics, and then by using a stepping matrix, would reward the physician as s/he meets the established goals. For example, $20,000 may be defined as the total bonus opportunity, with each individual goal at $4,000. The five goals would be specifically defined so that for each goal met, the surgeon would receive a payout no greater than the maximum of $20,000. Adding flexibility to the PPI arrangement may allow the parties to define their financial rewards based on individual or group practice outcomes.
This partnering model, an incentive-based reimbursement model for healthcare outcomes, must be reviewed for any legal issues present when implementing. Payments must be commercially reasonable and consistent with fair market value. When structuring any type of bonus incentive, it may not conflict with anti-kickback statutes or Civil Monetary Penalty (CMP) laws. In our discussions with healthcare lawyers, this type of partnership model has occurred in years past and should, if structured properly, be able to be implemented.
As consumers (patients and families) and the government continue to focus on the need for physicians and hospitals to provide high-quality patient care, P4P models will continue to grow and be enhanced. The trend of paying for services that do not include quality benchmarks has eroded for not only healthcare, but in other industries as well. For example, would you continue to use the same airline if you heard reports of continual maintenance issues when compared to their competitors? This simple example shows how quality must be a part of a new generation of healthcare. The question remains: should quality be expected or be rewarded, or both? As P4P gains acceptance, this question will continue to be examined from a variety of perspectives, with the goal of achieving fiscally-sound, high-quality care. To contact Corazon, please call (412) 364-8200 or visit www.corazon-consulting.com
1. DiIulio R. P4P Primer; The 10 things you should know about pay-for-performance reimbursement programs. Medical Imaging September 2005:18-19.
2. http://www.aishealth.com/ManagedCare/ GenBus/MCW_P4P_payers.html Access on 1/9/2006. “Private Payers Proceed on P4P programs, While watching CMS’s Progress on demos. Reprinted from Managed Care Week (May 2, 2005)
3. DoBias M. Needed: One set of standards. IOM calls for universal pay-for-performance criteria. Modern Healthcare December 2005:8-9.
4. http://www.aasld.org/eweb/DyanmicPage. aspx?webcode=payforperformance Accessed 1/9/2006. Pay for Performance and Why You Should Care.
5. Lammie N. (ed.) Pay for Performance Improving Health Care Quality and Changing Provider Behavior, But Challenges Persist. Western Pennsylvania Hospital News December 2005:4.
6. Mantone J. Incentives linked to access woes. Modern Healthcare December 2005:10.
7. Scalise D. Two states, two stories: Pennsylvania and Tennessee take very different routes to reporting quality data. Hospitals & Health Networks. November 2005:40-44
.8. Cardiovascular Roundtable. Care Quality: Pay-for-performance gains clout as payment methodology of the future. 7/27/2004.
9. http://www.cms.hhs.gov/apps/media/press/ release.asp?Counter=1343 Accessed 1/11/2006. Medicare Pay for Performance (P4P) Initiatives.
10. Glendinning D. Medicare tests pay-for-performance. American Medical News February 2005:1-2.
