Pay-for-Performance Programs Spark Debate

Attendees at the first National Pay for Performance Summit question whether health care providers should receive financial rewards for improved patient health.

LOS ANGELES—Should your doctor get a bonus if you stop smoking and lose weight? Thats the kind of question attendees are wrestling with at the first National Pay for Performance Summit here Feb. 6-9.

Pay-for-performance, or P4P, is a controversial but growing practice in which health care providers receive more money if they meet certain quality objectives, such as screening patients for disease or keeping patients blood pressure under control.

The Integrated Health Association is expected to announce the results of the largest—and perhaps most complex—initiative to date at the conference. The groups P4P initiative lasted three years and followed more than six million patients in California. In 2005, it paid out more than $54 million in rewards to medical groups, up from $37.5 million in 2004.

The initiative is also unique in that seven health insurance companies collaborated on what to measure, though not all of them paid using IHAs recommended weightings.

Yet the architects of the so-called California Experiment said that they were just learning how to ask the right questions. "You never have all the data youd like," said Stephen Shortell, dean of the School of Public Health at the University of California, Berkeley, who evaluated some of the performance measures.

"Its a wonderful beginning," said Bart Asner, CEO of Monarch HealthCare, but he said that the metrics measured were still too simple.

Not many people disagree that paying more for higher quality can make sense both ethically and financially, but few agree on the details of how such programs should work.

Paying doctors more for processes, such as ordering screening tests, assumes that doctors use the information appropriately. Paying doctors for patient outcomes, like controlled blood glucose levels or adherence to a medical regime, is better correlated with patient health but harder to attribute to the doctors skill. In fact, public health advocates worry that such measures could simply redirect money toward richer areas, where patients are more likely to follow doctors orders.

/zimages/6/28571.gifOne study concluded that doctors will provide higher quality care when given financial incentives to do so. Click here to read more.

Improved quality can cut costs by preventing costly procedures, like hospital stays and surgical complications. Ironically, such achievements can mean lost revenue for providers because they have higher profit margins on those procedures.

Another issue is how much to reward physicians. The IHA program gave rewards not to individual doctors but to the medical groups , who decided how to distribute funds. The common belief was that the P4P incentive needed to be at least 5 percent of a physicians salary to encourage change. The IHA program amounted to much less than that, between 1 and 2 percent. Steve McDermott, CEO of Hill Physicians Medical Group and former IHA chair, said he had boosted the rewards to physicians participating in the program by several multiples, "just to get their attention."

One thing that is certain is the role of health IT in making such programs feasible. In the first year of the experiment, 10 percent of a health groups quality score came from what health IT measures were in place. In the subsequent two years, that rate doubled. By the second year, "it became really clear that data collection was at the heart of this—therefore the increase of the weight," said Tom Williams, executive director of the IHA, which managed the program.

In fact, doctors offices that met all the IT quality indicators scored an average of 9 percent higher on the clinical quality indicators, which included childhood immunizations and disease screening.

IHA also decided that all data would be collected electronically at the early planning stages, two years before the program began. That dramatically cut costs and meant more physicians could be included.

Williams estimated that the cost of administering the program was just under a million dollars. Other programs use a process called chart review, in which patients medical records are manually reviewed. That costs about a dollar per patient, said Williams, though more measures can be collected.

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