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Rewarding Good Behavior

February 1, 2007
by Mark Hagland
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With Medicare as a major proponent, pay-for-performance programs are gaining traction across the country.

Pay-for-performance (P4P) programs, which call for healthcare providers to get more money for achieving better outcomes, are here to stay, in a big way.

For example, P4P programs are exploding among private health insurers all across the industry, as evidenced by the Manasquan, N.J.-based Managed Care Information Center, which reported in September that in 2005 there were 112 pay-for-performance programs nationwide, compared to 82 in 2004.

And the federal government, by way of the Medicare program, has gotten into the P4P game in the past two years through its Hospital Quality Incentive Demonstration Project (HQIDP), signaling a sea change that in the next few years is sure to roil healthcare.

In fact, analysis released last summer by San Diego-based Premier Inc. (the Medicare program's partner in the HQIDP program) found that, had hospitals nationwide followed the same care processes recommended in the demonstration project for pneumonia, heart bypass, heart attack, and hip and knee replacement procedures in 2003, as many as 5,652 fewer deaths and 1 million fewer hospital days could have resulted, with as much as $1.4 billion in savings to the Medicare program.

With such statistics backing up the federal government's development of its demonstration project (in which about 260 hospitals are participating to date), there's no question that P4P as a concept has reached a tipping point in healthcare.

Private payers

In the private-payer sphere, some programs — such as the several-years-old California program involving nearly all the state's major private health insurers, as well as hundreds of physician groups statewide — continue to make P4P progress. Peter Lee, president and CEO of the San Francisco-based Pacific Business Group on Health, the employer coalition involved in the California program, says the future of the concept is bright.

"I'm confident that we will get a very full dashboard of measures in the next couple of years covering the vast majority of measures, as well as measures across all specialties, such as how patients experience the care they get and understand their providers' directions," he says, speaking of P4P programs generally. (The California program, whose principal provider sponsor is the San Francisco-based Integrated Healthcare Association, is now rewarding the performance of 225 medical groups representing 12 million enrolled health plan members across California, confirms IHA Executive Director Tom Williams).

One of the most successful participants in the Medicare HQIDP program is the Kettering (Ohio) Medical Center Network. Frank Perez, president and CEO of the five-hospital network, says, "One of the things we have collectively learned" in the demonstration project "is that quality costs less." But, he adds, it takes a lot of hard work and determination to transform processes; and, critically, it requires top-flight information technology — IT that is both reliable and readily accessible.

And that is what makes P4P such a mountainous challenge for CIOs. "The ability to capture data, and to have that data achieve a level of integrity that makes its use in programs like this easier, is key" to making P4P programs work, says Richard Popiel, M.D., vice president and chief medical officer at Newark-based Horizon Blue Cross Blue Shield of New Jersey.

Data is key

Last summer, BCBS-NJ 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 its provider network, prompted by concerns over care quality in New Jersey hospitals.

"In other words," says Popiel, "none of this works unless the people who are on the receiving end believe that the data is as good as it gets, and is a reasonable representation of what actually happened. So I think it's all about data integrity, and about having systems that produce that kind of data."

John Glaser, Ph.D., vice president and CIO of 10-hospital Partners HealthCare System based in Boston, agrees completely. P4P programs, he says, are forcing CIOs to marshal their organizations' IT resources to improve data quality and availability, and to enhance EMR-based decision support tools for the clinicians whose work will be analyzed and judged by P4P programs.

"To the degree this is coming their way," he says, "CIOs should be prepared to have a series of IT responses," in order to facilitate high performance under such initiatives.

Indeed, the need to develop top-flight IT capabilities for P4P mirrors overall concerns over how such programs could affect reimbursement, including negatively.

"I think the logical implication of pay for performance is the other side of the coin — not paying for not performing," says healthcare futurist Jeffrey Bauer of the Dearborn, Mich.-based ACS Healthcare Services consulting firm. The Chicago-based Bauer adds, "It's quickly going to emerge that there will be non-payment for non-performance."

In that emergent environment, many agree, IT capabilities will need to be better than ever, as providers scramble to prove their clinical, efficiency and patient satisfaction outcomes are indeed worthy of payment in the new healthcare.

Author Information:

Mark Hagland is a contributing writer based in Chicago.

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