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.
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.
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.
"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
Staten Island University Hospital on Staten Island in New York has achieved similar results to those of KMCN, scoring in the top decile for at least two measures over the past two years in the CMS/Premier P4P demonstration project, confirms CEO Anthony Ferreri. The keys to sustained performance in P4P, say Ferreri and chief quality officer Joseph Conte, are strong executive leadership, strong medical staff leadership, a solid chief quality officer and solid nursing executive leadership. "I can't emphasize enough what Joe Conte has done to use the protocols in place, and enhance and improve upon them, to bring us to the performance we did," Ferreri says. Conte emphasizes the CEO leadership that has made high clinical quality performance a top-of-mind goal across the entire organization.
At San Francisco-based Integrated Healthcare Association (IHA), the goal has been to broaden and improve what is now the longest-running multiple-payer-based P4P program in the United States, says executive director Tom Williams. The largest health plans operating in California — Aetna, Cigna, Blue Cross Blue Shield, HealthNet, PacifiCare, Western Health Advantage, and Kaiser Permanente — have been involved in rewarding the performance of 225 medical groups representing 12 million enrolled health plan members, Williams says (with Kaiser, a closed-panel system, rewarding its own physician groups separately). The program currently involves 22 measures (10 core clinical measures, with numerous sub-measures, including four patient-experience measures and two IT-related measures). Payment levels have varied by plan. "The application of a common measurement set across multiple plans is very powerful," Williams says. "It increases the sample size, credibility, and reliability of the results. That's big. That in turn captures the attention of the physician groups."
At Newark-based Horizon Blue Cross Blue Shield of New Jersey (BCBSNJ), vice president and chief medical officer Richard Popiel, M.D., says that his health plan (which serves 3.2 million members) this summer came together with the Washington, D.C.-based Leapfrog Group, an employer alliance, to create a hospital quality recognition program for the 68 hospitals in Horizon BCBSNJ's provider network. The program had just been launched as of press time, but Popiel says he believes this program — which is being called a quality recognition program, since there is no pay-downside involved — has the potential to move New Jersey hospitals forward through positive recognition (and additional reimbursement) for quality clinical outcomes.
Concerns over quality, cost
The mathematics behind the P4P movement are actually rather simple at a fundamental level, say all those involved. For purchasers and payers, healthcare services simply cost too much and don't provide consistent and reliable standards of clinical quality.
At Horizon BCBSNJ, for example, Popiel says that executives were shocked when in the past couple of years several respected studies, including two coming out of CMS, found New Jersey hospitals' overall clinical quality to be in the bottom five or 10 among all states.
"When you put them all together, they create a burning platform as far as we're concerned," Popiel says.
In fact, one CMS study from 2000 that was repeated with updated data and a slightly altered methodology in 2003 found that New Jersey hospitals "had actually deteriorated" from an adjusted 41st place among 50 states to 43rd. "So we were very low," Popiel says. "Plus, we were one of the states that had the least penetration of the Leapfrog methodology in our hospitals." Coaxing New Jersey hospitals towards adoption of Leapfrog strategies, while generally improving clinical quality, is also a goal.
And while quality concerns were at the core of Horizon BCBSNJ executives' decision to partner with Leapfrog on its recognition program, quality incentive programs nationwide are also being driven by cost calculations, according to Martha Priddy Patterson, a director in the Human Capital Practice at Deloitte Consulting, Washington, D.C.
"The bottom line is that employers are desperate to find ways to control the cost of healthcare," she says. And, she adds, executives of U.S.-based manufacturers and other businesses naturally compare themselves with competitors in other countries that lack the private insurance-based healthcare costs U.S. corporations face. Not surprisingly, "Employers have been the ones pushing things like Bridges to Excellence (a not-for-profit coalition promoting P4P) and talking about pay-for-performance, or value-based purchasing."
Given the trend toward differential pay for demonstrably higher clinical quality, healthcare CIOs are faced with a clear mandate for change, industry observers agree.
As John Glaser, Ph.D., vice president and CIO of the 10-hospital Partners Health Care integrated system based in Boston, puts it, "There are a couple of ramifications for people with jobs like mine. One is that there is increasing interest in having good data internally. Sometimes it's leveraging data from plans, but it's also how well patients do in specific clinical areas like cardiac care or pediatrics. So it forces you to wrestle with issues about poor data, or issues around accuracy of data — for example, who is the patient's primary physician?
"The other part of this is the importance of implementing a variety of elements within the EMR to help physicians perform well, including creating dashboards to help them compare their performance with their peers," Glaser adds.
Responding to the P4P phenomenon will require CIOs to marshal efforts across a variety of IT areas, Glaser says, from improving data accuracy and availability, to enhancing EMR-facilitated tools for clinicians, to creating disease registries of patients with chronic illnesses.
Indeed, he says, as P4P initiatives spread and expand — and Partners is involved in a number of programs already — CIOs need to be prepared for physicians demanding that CIOs speed up IT implementation processes to help the doctors cope.
"The core thing for CIOs," he says, "is to be prepared and to gear up and help their organizations pick and choose their responses. And if your core data systems are grubby, you're not going to be able to fix that up in a month."
Avoiding a checklist mentality
Industry observers express concern that though there is a broad consensus on the need for P4P programs in healthcare, how and what to measure have yet to evolve into maturity.
One pitfall is the potential for such programs to devolve into yet another series of task lists to check off, rather than prods to bring about fundamental clinical care quality improvement.
"Pay-for-performance has got to happen; we need to do it more, and we have to do it seriously," says Jeffrey Bauer, a health futurist and partner in the Dearborn, Mich.-based Management Consulting Practice of ACS Healthcare Services. "What I fear," says Bauer, who is himself based in Chicago, "is that we'll end up regressing to the mean, and focusing our resources on following checklists."
Purchaser executives agree.
"Purchasers are very concerned that providers will 'teach to the test' — will conform only to the measures being put forward," says Peter Lee, president and CEO of the Pacific Business Group on Health, a San Francisco-based employer alliance. "That's why there's a huge push on the purchasers' side to get a truly robust set of measures, potentially that even rotates items through them on a regular basis," he says. "We need a much broader set of measures on which to measure performance."
Erica Drazen, a vice president in the Emerging Practices Group at First Consulting Group, sees another problem as well. "We still don't have good agreements on what kinds of performance are good, so that's a deficit," she says. "But a consensus is beginning to emerge."
Meanwhile, Drazen says, standard commercial clinical software programs will need to be enhanced in order to help clinicians improve processes, as in the development of patient discharge protocol sets.
Whatever area they tackle first, all those interviewed agree that CIOs, along with other "C-suite" leaders in patient care organizations, will need to move quickly to adapt to the new accountability in healthcare, or risk being left behind as the P4P wave washes over their organizations.
Mark Hagland is a contributing writer based in Chicago.