Pay-for-performance: On its way to being implemented, big and small practices prepare
Fiscal Fitness: How States Cope
Pay-for-performance: On its way to being implemented, big and small practices prepare
While there has been considerable discussion nationally about paying physicians more to improve patient care, pay-for-performance initiatives have been slow to take hold in many communities, according to a Center for Studying Health System Change study released at the end of 2005.
Thomas Bodenheimer of the University of California at San Francisco, and lead author, tells State Health Watch he believes pay-for-performance programs can become widespread, but there are many obstacles that need to be overcome.
"Politically, a lot depends on Medicare," he says. "If Medicare pays in part on quality measures, other health plans will follow."
Mr. Bodenheimer's Issue Brief for the Center for Studying Health System Change is drawn from the organization's 2005 site visits to 12 nationally representative communities. Only two of the 12 — Orange County, CA, and Boston — have significant pay-for-performance programs up and running. In the other 10 communities, he reports, programs targeting physicians are either minimal or don't exist at all. It appears that Orange County and Boston are early adopters in part because many physicians in those communities are organized into large medical groups, integrated systems, or independent practice associations, while pay-for-performance is more difficult to implement in small physician practices that lack the resources and infrastructure to manage care systematically and track performance data.
"In all 12 markets, pay-for-performance has become a significant topic of discussion among health plans and physician leaders," Mr. Bodenheimer says. "Thus far, however, in most areas of the country few performance-based dollars are flowing to physicians."
Programs can look different
The Issue Brief identifies a number of ways that pay-for-performance programs can be structured:
- Physician organizations pay their individual physicians bonuses for improved quality measures, without health plan involvement.
- Employers pay individual physicians for improved performance. The report notes the Bridges to Excellence program, sponsored by a few large employers, has instituted this model in Boston and three other communities.
- Individual health plans or Medicare pay individual physicians for improved performance. Physicians are rewarded only for the small number of patients with a particular medical condition who are enrollees of a sponsoring health plan, making such programs of limited interest and small monetary reward to physicians.
- Individual health plans or Medicare pay performance bonuses to physician organizations rather than to individual physicians. The physician organization may invest the bonus money in quality enhancement and/or distribute the money to member physicians.
- Health plans band together to coordinate payment to physician organizations for improved performance. This model was pioneered by California's Integrated Healthcare Association.
Mr. Bodenheimer reports that in late 2004, major California health plans in a relatively organized effort paid physician organizations about $40 million in performance-based bonuses. The physician organizations received funds for demonstrating improved clinical care (cancer screening, childhood immunizations, management of asthma, diabetes, and cholesterol), patient satisfaction, and development of information technology. Physician organizations distributed much of the money to individual physicians.
He says medical directors are more enthusiastic about pay-for-performance than are frontline physicians, who become more interested when they see real dollars at stake. Because payments come to medical groups rather than directly to individual physicians, the groups have invested some performance dollars in internal systems to improve performance and data collection, in addition to distributing the money to frontline physicians.
"Despite the monetary benefit, physicians continue to have concerns about pay-for-performance," Mr. Bodenheimer says. "A key concern among physician organizations is the addition of quality measures by some plans, above and beyond the standard Integrated Healthcare Association measures, adding to the reporting burden. Leaders also worry that the association is adding measures without adding money, increasing the work/reward ratio. Doctors with poor quality scores tend to blame noncompliant patients. Leaders recognize that, thus far, quality improvements reported by the association are mainly improvements in documentation rather than in care itself."
There also are indications that many medical leaders and frontline physicians believe they are in a zero-sum game in which pay-for-performance funds are not new dollars but rather a redistribution of existing payments. Mr. Bodenheimer says one survey respondent said health plans would reduce capitation payments to physician groups to allow pay-for-performance payments, while a health plan leader said pay-for-performance dollars are a redistribution of payments, although another plan leader said they represented new money.
Physicians don't trust plan data
A barrier to pay-for-performance success, according to the study, is physician mistrust of health plan-generated performance data. Physician organizations spend considerable money to generate their own data, which favors sophisticated groups with clinical information technology capability. Moreover, since large physician groups have funds for quality-enhancing processes, pay-for-performance could widen a gap between larger and smaller physician organizations, Mr. Bodenheimer says. Health plan executives affirmed that the funds are going to larger and better-run medical groups, and that smaller practices lack the infrastructure to make a program work.
In Boston, the three largest health plans include pay-for-performance arrangements in contracts with integrated delivery systems. And plans also have organized pay-for-performance programs for physicians practicing in groups and independently.
While California's Integrated Healthcare Association pays bonuses for improved clinical quality, patient satisfaction, and information technology development, some Boston plans also target a portion of performance money for cost-containment measures such as percentage of prescriptions that are generic, utilization of expensive imaging services, or hospitalization rates.
Another difference is that in California funds are paid as a bonus on top of HMO capitation payments from health plans to physician organizations, while Boston's model includes both HMO and PPO products and the self-insured market. In Boston, adoption of pay-for-performance programs accompanied a significant change in physician-payment methodology. Thus, as the use of capitation to pay Boston physicians declined, performance-based payments became part of a revived fee-for-service reimbursement method.
Mr. Bodenheimer found that Boston's pay-for-performance efforts include both large physician groups and small practices. In addition to health plan pay-for-performance activities, some large employers are paying individual physicians quality-based bonuses under the Bridges to Excellence program.
One survey respondent said frontline physician awareness of pay-for-performance is only beginning to make its way out of boardrooms and into office practices. Boston physicians reportedly are more concerned about the stresses of medical practice than dollars. A concern of frontline physicians is that pay-for-performance means a little more money and a lot more work.
"Improving performance often involves identifying patients who are not receiving recommended care, such as mammograms or diabetes monitoring tests, and getting them to obtain needed tests," Mr. Bodenheimer says.
Physician leaders reportedly worry that the amount of money required to make quality improvements may exceed the performance-based bonuses coming from health plans.
The report says physicians in the 12 communities surveyed are divided among pay-for-performance supporters, skeptics, and resisters. In several communities, physician leaders reportedly are concerned that the amount of money at stake won't justify extra work for frontline physicians and won't cover physician organizations' extra expense. Some physicians are concerned that health plans are funding pay-for-performance by taking money from some providers to pay others. Some opponents call the programs "no pay for no performance," seeing them as a health plan strategy to pay physicians less.
"While frontline physician attitudes toward pay-for-performance vary widely, many physician leaders find pay-for-performance acceptable if all health plans have the same program," according to the survey results. "The prevailing model of physicians facing different measures and rules from different plans is seen as an untenable option."
As Mr. Bodenheimer tells State Health Watch, for pay-for-performance to gain significantly more widespread acceptance, the barriers seen by health plan executives are considerable.
"For each plan to have its own measures, rules, payment method, and payment target (physician groups, individual physicians, primary care physicians, specialists) creates major administrative hassles," he says. "In many markets, most physicians do not belong to physician organizations. In those cases, the numbers of patients with a particular condition enrolled in a particular health plan seeing a particular physician are so small that quality measurement is virtually meaningless and payments per physician will be too small to gain physician acceptance and influence practice patterns. Physician acceptance likely will be determined by the extent to which health plans commit new funds to reward improved quality."
What could accelerate adoption of pay-for-performance by health plans is a mandate in government programs. CMS now has a pay-for-performance demonstration project under way, in which 10 physician group practices will receive extra Medicare payments based on quality measures and cost reduction. The agency also has said it supports congressional efforts to integrate pay-for-performance into Medicare physician payments.
"What Medicare does is crucial," Mr. Bodenheimer says. "Should Medicare adopt pay-for-performance, private plans and Medicaid programs could well decide to adopt Medicare's measures, which in turn would reduce the problem of lack of standardization. Whether physicians like it or not, if the giant players decide to put money into pay-for-performance, it will happen."
He cautions that if Medicare doesn't take the lead for pay-for-performance, a lot of health plans still will do it, but the result will be a "mess," because of the varying rules and methodologies.
Mr. Bodenheimer also notes a policy concern in the fact that so far pay-for-performance so far is a program for larger medical groups that has not touched the majority of the nation's medical practices, which have fewer than five physicians. In terms of preventive services for Medicare patients, he says, quality in smaller practices is inferior to that in larger groups. "To the extent that improved performance requires data repositories, chronic illness registries, and other quality-enhancing innovations, small physician practices will not be able to keep up with larger groups," he explains. "A danger lurks that a gap will widen between larger high-quality groups and smaller lower-quality practices. On the other hand, pay-for-performance could become a catalyst for physicians to join larger groups that can make the investments necessary to improve performance and reap pay-for-performance funds."
While considerable effort is going into expanding pay-for-performance programs, Mr. Bodenheimer tells SHW that it's good to remember the jury is still out on whether such programs actually can change physician behavior.
"No one is yet saying that pay-for-performance is improving patient care," he cautions.
Ultimately, he says, the idea of paying for quality is a good one, but there are many questions about whether it can be done and how. As in all good ideas, he says, the devil is in the details, and it will continue to be important to monitor what is happening.
The Issue Brief is available at www.hschange.org. Contact Dr. Bodenheimer at (415) 206-6348 or e-mail [email protected].
While there has been considerable discussion nationally about paying physicians more to improve patient care, pay-for-performance initiatives have been slow ...Subscribe Now for Access
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