Pay-for-performance programs (P4P) are spreading. Medicare has committed to a national P4P demonstration project, a large employer group has initiated its own program, and the American Medical Association (AMA) has published principles it will use to assess such programs. The American Academy of Family Physicians (AAFP) published its own criteria last year. What are the characteristics of P4P programs, private and public examples, and benefits and risks of their use?
How does it work?
Pay-for-performance refers to financial-incentive programs that pay bonuses to participants (physicians, physician groups, health plans, or hospitals) that make progress, or attain specific benchmarks, in quality and efficiency. Alternatively, P4P programs may create different tiers of providers based on quality standards, and then give patients financial incentives (such as lower co-payments) to use one tier instead of another. This latter mechanism is currently the subject of a nasty argument between the Barnes Jewish health system in St. Louis and United Healthcare.
Goals may be clinical or nonclinical. Clinical goals usually measure processes of care (eg, measurement of hemoglobin A1C and lipids in persons with diabetes, use of beta-blockers and aspirin after myocardial infarction, anti-inflammatory medications for chronic asthma, or appropriate cancer screening). However, of late there has been movement toward using intermediate out-come measures, such as control of hypertension and blood sugar, and long-term outcomes such as mortality, morbidity, and quality of life. Nonclinical goals include implementing such information technology as electronic health records, or improving access to care and patient satisfaction.
How prevalent is P4P? A national survey conducted by Med-Vantage, a health informatics company, in November 2004, identified 84 programs—covering 39 million beneficiaries—that had some P4P characteristics.
They found P4P programs expanding from primary care providers to specialist involvement, from HMOs to PPOs, and from annual bonuses to tiered fee schedules. They also reported an emphasis on using the National Commission for Quality Assurance (NCQA) measures as performance goals, rewarding information technology adoption, and increasing involvement of the Center for Medicare and Medicaid Services (CMS).
P4P programs surveyed reported quality improvement as the #1 reason for their programs, validity of the data as their #1 concern, and early provider involvement and use of standardized measures as the main recommendations for new programs.1
National programs and how they might affect you
MedPAC and providers stress information technology. The Medicare Payment Advisory Commission (MedPAC), which makes recommendations on provider payments to CMS, announced in its 2005 annual report that Medicare should begin paying all physicians differently based on how they perform. MedPAC envisions rewarding the use of information technology such as electronic health records first, and later adding measures for quality outcome.2
Almost simultaneously with this recommendation, CMS announced that 10 large physician group practices would participate in a new P4P Medicare demonstration project. These practices hope to improve quality and lower Medicare costs (by focusing on disease management strategies and information technology), and in return, CMS will return a portion of the savings to them. Initially, CMS will base the majority of bonus payments on financial savings rather than quality improvement; this has led to concern that costs are the primary driver of the program.3
Premier Hospital Quality Incentive focusing on 5 clinical areas. CMS also sponsors the Premier Hospital Quality Incentive Demonstration, a P4P program that tracks performance for 5 common clinical conditions at 270 participating hospitals. The program rewards high performers from a bonus pool of $7 million per year over a 3-year period. In May 2005, Mark McClellan, MD, PhD, the director of CMS, announced improvement in all 5 areas (acute myocardial infarction care, coronary artery bypass graft surgery, care for congestive heart failure, hip and knee replacement surgery, and pneumonia care) in the first year of the project.4
Bridge to Excellence encourages more patient involvement. A national private sector response to the P4P movement has been Bridge to Excellence (BTE), a nonprofit organization whose board represents employers, providers, and health plans (emphasis on the employers) with major funding from large companies. It was created in response to the Institute of Medicine’s 2001 report, Crossing the Quality Chasm, which included a recommendation to redesign the way providers are paid to encourage quality improvement (TABLE 1).
TABLE 1
Bridges to Excellence key principles
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