Study tentatively supports quality pay for performance
Fiscal Fitness: How States Cope
Study tentatively supports quality pay for performance
Publication of the first study to assess the effects of quality incentives in a large health plan has added to the optimism over the promise of pay-for-performance to improve the quality of health care. But the lead researcher says it may still be too early to make policy based on the results.
Harvard University School of Public Health researchers looked at a pay-for-performance program implemented by PacifiCare Health Systems, one of the nation's largest health plans, in a Commonwealth Fund study. They found that for one of three clinical quality measures studied, a physician network that was offered bonus payments outperformed another network that was not.
As reported in "Early Experience with Pay-for-Performance: From Concept to Practice" in the Oct. 12 Journal of the American Medical Association, physicians who were part of the incentive program performed the same or slightly better on the other two clinical quality measures studied, although the difference between the two groups was not significant, according to study lead author Meredith Rosenthal. "The early results suggest that pay for performance has some effect, but there is not a big, dramatic change," she tells State Health Watch.
While quality improvement was modest, the bonuses also were modest, and improvement was assessed over a relatively short period of time — five quarters.
In 2003, PacifiCare began offering bonuses to some 172 medical groups in its California network if the groups met or exceeded 10 targets for clinical and service quality. The bonuses averaged a relatively modest 5% of PacifiCare's payments to the medical groups. The researchers compared the California network's performance with PacifiCare's Pacific Northwest network of 33 medical groups in Oregon and Washington, which did not have an incentive program. The study centered on three clinical care measures — cervical cancer screening, mammography, and hemoglobin testing for diabetic patients.
Although the California groups improved on all three measures, the Pacific Northwest group also improved. Overall, the only significant differences between the two groups was in cervical cancer screening, where the California network's quality score improved by 5.3%, compared with 1.7% in the Pacific Northwest. In total, the plan awarded $3.4 million (27% of the amount set aside) in bonus payments for all three measures during the program's first year.
When Ms. Rosenthal and her colleagues divided the California network into three performance levels, a clear pattern emerged — the group that began the program at the lowest performance level (more than 10% below the target) showed the most improvement but received the least in bonus payments, while the group that was performing at or above target at the outset received much more in bonus payments, although it improved the least of the three groups.
"Approximately 75% of incentive payments went to practices already performing at or above the baseline level before the incentive program was implemented," Ms. Rosenthal wrote. She tells State Health Watch the California groups remained on the same general trajectory as before. "They are improving quality but aren't moving off the trend line."
She and her co-researchers speculated that the groups that began the program with performance levels above the targeted threshold appeared to understand that they needed only to maintain the status quo to receive bonus payments. She said a more surprising finding was that the low-performing groups improved as much as they did, given their relatively low short-term chances of receiving a bonus.
One possible reason, she said, was that the low-performing groups may have viewed the program as a larger signal of a changing environment in which they faced increasing pressure to improve.
Ms. Rosenthal said an incentive program that pays explicitly for quality improvement, rather than strictly rewarding achievement levels, would alter the incentives for high-performing and low-performing groups, distribute bonus dollars more toward the low-performing groups, and possible increase incentives' overall impact. However, some health care organizations and payers might object to that idea, reasoning that it essentially condones low performance levels and fails to reward or even penalizes high achievers.
The researchers said it is possible to reward both performance and improvement through carefully designed incentive programs that draw on evidence and best practices.
"There is widespread consensus that existing financial incentives in the U.S. health care system are misaligned and fail to reward high quality," commented Commonwealth Fund president Karen Davis on the study. "It is encouraging to see some initial evidence that rewarding good performance can lead to improved systems helping ensure that Americans receive regular preventive care. We need to move from just paying for services that get rendered, to rewarding delivery of the right care for helping Americans live long and healthy lives. Rewarding high quality both provides the resources for improving quality and motivates change."
Significant potential for the future
Ms. Rosenthal said her research leads to a conclusion that pay-for-performance "has significant potential to improve the performance of the health care system, where reimbursement has historically failed to reward, and in some cases penalized, high quality. To achieve the critical goals of improving both the affordability and quality of care we will need to look not only to well-designed payment reforms, but also to such promising efforts as public reporting of quality and cost information, tiered benefit designs that give consumers incentives to choose higher quality and lower cost providers and treatments, and disease management."
She tells SHW she would caution those who look at the study results to realize it is too early to draw conclusions from what are first generation pay-for-performance programs. Ms. Rosenthal says a Centers for Medicare & Medicaid Services (CMS) study of hospital pay-for-performance programs took place in a "highly unusual environment with self-selected hospitals so they were trying hard to make it work."
Ms. Rosenthal notes that PacifiCare was trying to meet other goals with its program besides pay-for-performance and says improvement in quality measures will be an issue for future managed care contracts for the company.
She says while some doctors say it will take more than 18 months to bring about needed culture changes so groups can do better on quality measures, "I sometimes wonder if they really need to change culture to change their practices and increase cancer screenings."
In the first-generation programs, Ms. Rosenthal says, there is no real incentive for groups that are doing well or very poorly on the quality measures. "Going forward," she says, "we're going to need to make quality improvement an explicit goal for bonus systems. There is no reason to continue to pay groups to maintain the status quo. It's good to be sure that everyone has to stretch to reach a goal."
Earlier in 2005, Ms. Rosenthal testified before a U.S. House of Representatives subcommittee on employer-employee relations that looked at pay-for-performance and other trends in employer-sponsored health care. She said then that pay-for-performance has significant positive potential in the health care sector, where reimbursement has traditionally been based only on utilization of services and patients often are not in a position to discern high quality from low.
Pay-for-performance challenges
Ms. Rosenthal said payers faced a number of challenges in implementing pay-for-performance programs. First, there is little guidance in the literature for purchasers and health plans to reference when they set out to design a pay-for-performance program.
"An analysis of the features of the first generation of programs indicates that there are opportunities to improve the cost-effectiveness of pay-for-performance and increase the likely gains in quality and value," she said. "To help them design more effective pay-for-performance programs, purchasers and health plans need timely evaluations of a broad range of programs and targeted decision support."
A second challenge, according to Ms. Rosenthal, is that coordination among payers on the clinical domains and specific quality measures to target is desirable. If only a few of the many payers that a provider contracts with are paying for performance, or if each payer focuses on a different measure set, pay-for-performance's effects may be diluted.
According to Ms. Rosenthal, CMS leadership is central to furthering the goal of increasing pay-for-performance, as private payers have historically emulated many of Medicare's more significant payment reforms. CMS could also support pay-for-performance efforts, she testified, by contributing "de-identified" data to an all-payer data set from which more reliable performance evaluation could be conducted.
Last fall, CMS reported that quality of care had significantly improved in hospitals participating in the Premier Hospital Quality Incentive demonstration, a Medicare pay-for-performance demonstration project.
"We are seeing that pay-for-performance works," said CMS administrator Mark McClellan. "We are seeing increased quality of care for patients, which will mean fewer costly complications, exactly what we should be paying for in Medicare."
The agency has awarded $8.85 million to hospitals that showed measurable improvements in care during the demonstration's first year. he said improvement in evidence-based quality measures is expected to provide long-term savings because of their demonstrated relationship to improved patient health, fewer complications, and fewer hospital admissions. It is the first time that Medicare has awarded monetary bonuses to health care providers in a pay-for-performance demonstration, and it provides statistical evidence that the model works to improve health care quality, Mr. McClellan added.
Quality of care improved in all five areas for which it was measured in the demonstration. Thus, between the first and last quarters of the demonstration's first year, composite quality scores went from 87% to 91% for patients with heart attack, from 65% to 74% for patients with heart failure, from 69% to 79% for patients with pneumonia, from 85% to 90% for patients with coronary artery bypass graft, and from 85% to 90% for patients with hip and knee replacement.
Hospitals in the top 10% for each condition were given a 2% bonus on their Medicare payments for that condition. Those in the second 10% got a 1% bonus. Hospitals in the remainder of the top percent were recognized for their quality but were not paid a bonus.
Composite quality scores were calculated for each demonstration hospital by combining individual measures into an overall quality score for each clinical condition.
Wide variety in top performers
CMS said there was a wide variety in the top performers. Two hospitals were in the top two deciles for all five clinical conditions — Hackensack (NJ) University Medical Center and McLeod Regional Medical Center in Florence, SC.
The top hospital for heart attack care improvement was Fairview Lakes Hospital, MN. Top hospital for heart failure was Lourdes Hospital in Paducah, KY. St. Francis Hospital in Broken Arrow, OK, was top hospital for pneumonia care. Top hospital for coronary artery bypass graft was Greenville (SC) Hospital, while top hospital for knee and hip replacement was Oklahoma City's Bone and Joint Hospital.
"We are examining the first-year data and working with our partners in the quality improvement community to share and apply the lessons learned," Mr. McClellan said. "But the major early finding is that the project did substantially improve important areas of health care quality at participating hospitals."
American Hospital Association executive Carmela Coyle said the results suggest that paying hospitals more for quality and having them focus on how they treat patients can improve care. "I think it shows rewarding excellence works," she said.
A similar experiment among physicians who treat Medicare patients at their offices began in 2005. The hospital experiment is now in its second year with preliminary results showing continued improvements in quality.
[Contact Ms. Rosenthal at (617) 432-3418. More information is available from the Commonwealth Fund web site at www.cmwf.org and from the CMS web site at www.cms.hhs.gov.]
Publication of the first study to assess the effects of quality incentives in a large health plan has added to the optimism over the promise of pay-for-performance to improve the quality of health care.Subscribe Now for Access
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