Skip to content Skip to navigation

Pay for Performance

February 1, 2006
by David Raths
| Reprints

Not long ago, people who advocated rewards for physician performance were voices crying in the wilderness. Now many are singing the praises of pay-for-performance (P4P) programs, and the momentum shift is noticeable.

Essentially, P4P uses financial bonuses to encourage physicians to meet standardized quality measures and boost clinical outcomes and patient satisfaction. Its potential to spur an increased use of patient registries, e-prescribing, electronic medical records and health information exchanges has widespread implications for health IT executives.

The number of P4P programs nationwide grew 25 percent from 2004 to 2005, according to Med-Vantage Inc. Through surveys, the San Francisco consulting firm counted 112 programs in 2005, including 81 sponsored by commercial health plans. The Centers for Medicare and Medicaid Services (CMS) has six programs, including a three-year P4P pilot program for physicians who treat Medicare patients.

While encouraged by CMS' involvement, employer groups pushing for change must continue to innovate, stresses Francois de Brantes, program leader for healthcare initiatives at General Electric Co., Fairfield, Conn.

As an officer and director of the employer-sponsored Bridges to Excellence (BTE) P4P program, de Brantes approached health plans a few years ago, he recalls: "No one wanted to do it, so we decided to do it ourselves. Now we've demonstrated the effectiveness, and we're starting to hand it off to the health plans."

BTE, now in its third year, has developed P4P programs involving diabetes, cardiac care and physician IT use and is planning new ones around back care and cancer. Several insurers have licensed the BTE model for use in their markets, including UnitedHealthcare, Minneapolis; CIGNA HealthCare, Bloomfield, Conn; and CareFirst Blue Cross Blue Shield, Owings Mills, Md.

The dozens of P4P projects under way have become a great laboratory for experimentation with performance measurements and payment plans. As medical studies and return-on-investment analyses begin to appear, P4P sponsors are reaching consensus on the key challenges: encouraging physician involvement, developing more meaningful incentives and creating a robust IT infrastructure. Meanwhile, vendors are working on more sophisticated products to help with data reporting and integration issues.

P4P is moving beyond primary care into specialists' offices. Currently, 95 percent of incentive programs target primary care physicians, according to Med-Vantage's surveys. Other, smaller P4P programs also offer incentives to specialists and/or hospitals. Also still in the formative stages are performance report cards that consumers are expected to use to comparison-shop for physicians and hospitals.

Engaging physicians
Although insurers and employer groups are moving ahead enthusiastically, progress is being hampered by doctors who remain skeptical about P4P, either because they disapprove of the concept or don't trust the data.

"Some see the value of financial incentives, while others find it insulting that they're being offered more money to do their job," says Anne-Marie Audet, M.D., quality improvement vice president at the Commonwealth Fund, NYC, a foundation that supports research on health and social issues.

Other issues include which measures should be used and how data should be gathered. Most P4P programs pull data from insurance claims. Yet the BTE program asks doctors to gather data from their charts, which de Brantes claims is key to physician acceptance. "When they do the self-analysis, they have their 'Aha moment' and realize perhaps they weren't doing as well as they thought in certain areas," he says.

Doctors must approve of the underlying data and methodologies if they are going to accept being rated, notes Thomas Mahoney, M.D., CEO of the Rochester Independent Practice Association (RIPA) in Rochester, N.Y., which has approximately 900 primary care physicians.

RIPA has partnered with Excellus Blue Cross Blue Shield, Rochester, N.Y., to provide doctors with reports comparing their performance and efficiency to that of their peers. "Folks don't like getting report cards. My docs don't like it any more than my kids do," Mahoney says. "But the challenge is to make it clinically sound and nonjudgmental. If we can say to them, 'Here's the best that's been achieved by your peers,' then we can have a conversation that induces change."

In 2005, the Excellus/RIPA program became one of the first projects to identify a return on investment. After spending $1 million on technology for physician profiling and patient registries, the project has since attributed almost $3 million in diabetes care cost savings to the investment.

The jury is still out on whether P4P will work well outside managed care settings, said Suzanne Delbanco, CEO of the Leapfrog Group, a Washington, D.C.-based group administering an $8.8 million initiative to help develop and measure P4P efforts. "It's much easier to engage physicians when they're in a tighter relationship, such as an HMO," she says. "In the PPO model, doctors are engaged with many health plans. They hear a lot of noise from all over the place. That makes it hard to get their attention."

Defining incentives
P4P advocates are still experimenting with payment levels. Some suggest incentives need to be 10 percent of a physician's annual income, but many are currently paying only 1 to 2 percent.