PAY-FOR-PERFORMANCE: IMPLICATIONS FOR HEALTH PLANS

In our last article we discussed where and how P4P is being implemented. In this article we focus on the implications for your organization. Pay-for-performance programs continue to get market traction. P4P sponsors now cover over 50 million people. CMS has reported that its first demonstration pay-for-performance (P4P) program improved quality of care significantly in participating hospitals. Employer interest in plans with P4P incentives, already high, is likely to be further stimulated by this news. In some markets, health plans without a P4P program may be at a competitive disadvantage. Large health plans like Aetna, as well as self-insured corporations like General Electric and General Motors, have made significant investments in P4P initiatives. Smaller health plans now have to decide how to position themselves with regard to P4P. Following the five steps below will help you decide how (or whether) to structure a P4P initiative to achieve the results you want.

DETERMINE YOUR GOALS

What do you want to achieve with P4P? While all players are hoping for longterm cost savings, short-term goals vary significantly. Some focus on clinical quality or safety factors, others, on increasing the level of customer service and responsiveness. Many plans set goals that directly impact spending and efficiency, to achieve short-term cost reductions. Differentiating your organization in a market increasingly filled with P4P choices for employers requires taking a hard look at what will attract those employers. Goals based on improved health outcomes, for example, can have many benefits for employers, including lower absenteeism and a more productive workforce.

SELECT APPROPRIATE MEASURES

Hospital P4P program measures are starting to coalesce around standard sets of measures promulgated by the Leapfrog Group, AHRQ (Agency for Healthcare Research and Quality), the JCAHO, the National Quality Forum and of course, CMS. Hospitals will be familiar with measures selected from these measurement sets and be able (with some effort) to report performance on them. Physician programs have not evolved as far, but the CMS role is likely to be just as important in the long term. Using standardized measures is truly important for physicians, as most practices would find it onerous to capture and report data for measurement sets that differ significantly between payers. The potential to frustrate your physician network needs to be balanced against possible cost savings or market advantage. If you choose to use measures that are not already in wide national use, it is essential to pilot those measures before full implementation. Ideally, providers should be modifying their workflow to assure that they improve performance. Some are adept at making real change in this way, and some are skilled at gaming the system. It’s easy to insert a check off box and ask a patient if they smoke, but if “counseling” means handing them a pamphlet, you will be paying for a paper impact. In contrast, once a physician performs a diagnostic test, it is likely that the results will inform further treatment.

DECIDE ON INCENTIVE MECHANISMS

Incentive payments can be positive or negative, and based on absolute, incremental or relative standards. The great majority of plans use bonus payments for positive performance. Other payment incentives, used alone, in combination with bonuses or in combination with each other, include fee differentials, per task payments, higher capitation, payments from withholds, and other mechanisms. Some payers have instituted tiered networks, in which providers receive different capitation payments or fees depending on how they are ranked. Consumers may pay less to use providers who perform better. Physician incentives can function at the level of the individual physician, but are more commonly applied at the practice level. Measures and incentive level interrelate; clinical quality measures can be applied to individual physicians, but most measures of efficiency and patient satisfaction are more relevant at a practice level.

LOOK AT WHAT YOUR DATA SYSTEMS CAN HANDLE

Consider your data-handling capabilities when establishing measures and incentives. Many measures now in use come from HEDIS data, claims and administrative data – and from sampling records. Some plans have two fully distinct systems for HMO products and other products, and have to modify measurements and incentives accordingly. Performance changes are maximized when providers get accurate feedback on all measures as frequently as possible. More frequent incentive payments (many plans make only annual payments) also help. The challenge is to generate timely response when dealing with small numbers (especially at the physician or small practice level). Small numbers also pose a problem in calculating severity adjustments, yet without those adjustments, physicians are not likely to perceive incentives as accurate or fair.

PROBE YOUR PARTNERS

Partnership is at the core of successful P4P programs. Involving providers up front is critical to their perception that measures and incentives are fair and reasonable. Find out what their questions are, and make sure to answer them. Know what other plans in the market are doing. If you are facing a large player with a substantial investment in performance measurement (Aetna created its own subsidiary for this purpose) it may make sense to use the same measures, because you certainly cannot duplicate that investment. P4P can be a quid pro quo, allowing you to provide a rate increase that your providers would not otherwise receive. As with all contracting issues, your ability to impose pay-for-performance systems depends entirely on your market strengths and priorities.