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Catching the P4P Wave

November 1, 2006
by Mark Hagland
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Healthcare organizations must start preparing today for pay-for-performance initiatives.

Across the United States, hospitals, health systems, and medical groups are scrambling to prepare for an emerging wave of pay-for-performance (P4P) programs. These initiatives call for measured clinical and patient satisfaction quality outcomes to be documented, and private and public payers to then reward providers with more money for higher quality performance.Frank perez

Indeed, a survey released this summer by Deloitte Consulting's Washington, D.C.-based Deloitte Center for Health Solutions found that 10 percent of employers nationwide are already engaged in some form of quality-based purchasing with health plans and provider networks.

Meanwhile, the Manasquan, N.J.-based Managed Care Information Center reported in September that last year there were 112 P4P programs nationwide, compared to 82 in 2004.

Not surprisingly, a concommitant wave of seminars and "how-to-succeed-with-P4P" programs is sweeping the industry as well. But provider organization executives who want to succeed in this new world would do well to first heed the words of Frank Perez.

Perez, president and CEO of five-hospital Kettering Medical Center Network (KMCN) based in Kettering, Ohio, could easily brag. As a participant in the Centers for Medicare and Medicaid Services (CMS)/Premier Inc., P4P Hospital Quality Incentive Demonstration (HQID) project, Perez's health system scored in the top decile in all areas among the participating hospital organizations.

Pay-for-performance at the 1,200-acute-care-bed organization that covers a 10-county area in southwestern Ohio "is not something new we've been doing, but instead is consistent with who we are," Perez says. "We have used in our board structure a key result area/strategic planning process, a dashboard. It is strong, and analyzes quality across five measured dimensions. We've used the Premier database for over 10 years to benchmark our clinical performance."

The quality program is deeply embedded in KMCN's structures and processes, Perez says. Annual salaries and bonuses for director-level-and-above executives are tied to overall organizational clinical-quality performance. So far the cardiac, orthopedic, medicine, and a few other service lines have been fully structured to link the staff members' pay to corresponding measured quality improvements.

What's more, the organization's physicians participate actively through the medical staff structure in the care-quality management process. "We have been very transparent," Perez says, noting that in a few of the main service lines, physician quality outcomes are posted by individually named doctors.

The physicians, Perez says, have reacted positively. "When we stack up their performance against their peers through the Premier database, they don't want to be last."

Nationwide initiatives move forward

The HQID project collected a set of 33 quality indicators from more than 250 hospitals nationwide, giving incentives to hospitals performing in the top 20 percent for each clinical condition. Such types of differential reimbursement can be powerful.

According to Deloitte analysis, if all hospital inpatients nationwide in 2004 had received most or all (76 -100 percent) of a set of widely accepted care processes in four key clinical areas — pneumonia, cardiac bypass, acute myocardial infarction, and hip and knee replacement — there would have been nearly 5,700 fewer deaths, 8,100 fewer complications, 10,000 fewer readmissions, 750,000 fewer hospital days, and a savings of $1.35 billion across the U.S. healthcare system.Anthony ferreri

Most people involved in P4P programs agree that it is only through transforming processes and culture that hospitals, medical groups and health systems will reach the levels of success seen by organizations like KMCN. Process, cultural transformation, and leadership from the top will be key, says Stephanie Alexander, senior vice president at Premier Healthcare Informatics, the Charlotte, N.C.-based division of Premier Inc., San Francisco, a company crunching the CMS/Premier P4P program data.Joseph conte

"Pay-for-performance is not a fad. Aligning payment with quality will be an important and continuing trend," Alexander stresses. "And what's needed is a ground in good, transparent measures, not just payment. In the longer term, consumers are going to be demanding it; and that's going to drive how CEOs run their organizations."

The core question for CEOs, she says, is, "How do you need to change your day, your week, your month?" CIOs, she adds, need to move forward rapidly to build electronic health record (EHR) systems, to link clinical and financial systems, and to "get (their organizations) to this nexus of cost and quality."

Progress in action