New P4P program uses established measures

Initiative will rank hospitals by effectiveness

The Leapfrog Group, based in Washington, DC, has launched a new incentive program for hospitals that it hopes will do for the private sector what the Premier/Centers for Medicare & Medicaid Services (CMS) Hospital Quality Incentive Demonstration Project appears to be doing for Medicare.

Called the Leapfrog Hospital Rewards Program, it will measure the quality of care and the efficiency with which hospitals use resources in five clinical areas:

  • Leapfrog has designed its program to reward improvers as well as best performers.
  • Key areas represent approximately 33% of admissions and 20% of commercial payers’ inpatient expenditures.
  • Local market conditions, employer groups, and health plans will dictate incentive structures.
  • coronary artery bypass graft (CABG);
  • percutaneous coronary intervention (PCI);
  • acute myocardial infarction (AMI);
  • community-acquired pneumonia (CAP);
  • deliveries/neonatal care.

According to The Leapfrog Group, these areas represent a significant portion of hospital admissions and expenditures among the commercially insured population. (Actuaries at Towers Perrin analyzed hospital quality and payment data to identify these areas, which represent approximately 33% of admissions and 20% of commercial payers’ inpatient expenditures and present significant opportunities for quality and efficiency improvements.)

Accordingly, they have projected potential savings opportunities for the average employer in each of the areas:

  • CABG — $62.7 million
  • PCI — $58.2 million
  • AMI — $53.6 million
  • CAP — $29.5 million
  • Pregnancy/newborn — $23.4 million

Hospitals will be scored and rewarded separately for each of the five areas and can participate in any of the areas in which they provide care.

If they demonstrate sustained excellence or improvement, hospitals will be eligible for financial rewards and increased market share.

Scores can become financial incentives

Hospital scores can become the basis for financial incentives for consumers, such as waived copays or deductibles for choosing care at high-performing or improving hospitals. Additionally, these scores can be incorporated into health plans’ existing performance-based incentive and reward programs.

All data collected for the Leapfrog Hospital Rewards Program will be submitted to Medstat, Leapfrog’s general contractor for the program, to be aggregated, scored, and ranked.

The program now is accepting data from hospitals, and the first results will be available in October.

The first implementers are likely to begin paying rewards in 2006. Medstat (, a health care information company that provides market intelligence and benchmark databases, decision-support solutions, and research services for managing the cost and quality of health care, also provides data collection, analysis, and support services to The Leapfrog Group for its Hospital Quality and Safety Survey.

The Leapfrog Group gives a strong nod to CMS, whose Premier/CMS Hospital Quality Incentive Demonstration Project, it says, inspired Hospital Rewards.

"As you know, we are strongly committed to using national standardized measures in gauging performance and partner whenever we can with Medicare," notes Suzanne Delbanco, CEO of The Leapfrog Group.

"So, when their program got announced, we thought it looked like a really good framework for what we could create for our members in the private sector. That led to us creating something that builds on their project but does depart in key ways," she notes.

One key difference is that CMS focuses on populations largely 65 years or older. "Employers focus on younger populations," Delbanco says. "So, for example, instead of focusing on hip or knee replacements, we will focus instead on delivery and newborn care, which is very relevant to employed populations."

The other important difference, she continues, is that Leapfrog has added an efficiency component that encompasses risk-adjusted lengths of stay and readmission rates in the five key clinical areas, which then are coupled with effectiveness to ultimately produce a performance rating.

To measure efficiency of resource use, Leapfrog will look at severity-adjusted average length of stay and readmission rates for each of the five clinical areas.

"One thing that makes this program unique in today’s marketplace is that we use wherever possible nationally standardized measures of performance," Delbanco says.

The program uses quality measures that are endorsed by the National Quality Forum and already are being collected through the Joint Commission on the Accreditation of Healthcare Organizations (JCAHO) ORYX initiative and the Leapfrog Hospital Quality and Safety Survey. "We wanted to keep the reporting burden to a minimum," she explains.

Since there are not as yet national standards for efficiency, Delbanco continues, "We had to break new ground there, creating some original measures, but we vetted them with many experts and stakeholders."

Other P4P or incentive reward programs are not designed with replication in mind, she asserts. "Many are developed organically within certain marketplaces," Delbanco notes. "But we are working to create a national movement — a national program using national benchmarks — which can be adapted and customized to local markets."

She adds that this program can make a real financial difference. "I don’t believe any other program out there captures areas covering 30% of hospital admissions for the commercial population, so this gets at a significant chunk of where employers are spending their money," Delbanco declares.

How hospitals participate

Hospitals that want to participate in the program must follow several steps, she says.

"If they decide they want to participate, they complete the Leapfrog survey, ask their core measure vendor who reports to the Joint Commission to forward the data to us, and then ask them to help submit data on length of stay and readmission rates," Delbanco explains.

As for employers and health plans, they can choose to either license the data coming out of the program and integrate it into their own preexisting program or license the entire program.

In that case, Leapfrog will provide implementation toolkits and technical assistance for administration of the program and lend its brand to the effort. "In that case, they also will have to agree to adhere to the rewards principles, such as rewarding improvers, not just the best performers," Delbanco explains.

Early interest in the program has been strong, she says. "We are pleased that a number of organizations have already committed to work with us to establish the Leapfrog Hospital Rewards Program in the market," Delbanco says, noting that the following companies have agreed to work with Leapfrog on the new program: CIGNA HealthCare, The Memphis Business Group on Health, Premier Inc., General Electric, Hannaford Brothers, Verizon Communications, and the Human Resources Policy Association.

As for the way the incentives will be structured, that will depend on local market conditions, she explains.

"There are two ways to think about it," observes Delbanco. "On the patient side, the employer or health plan might choose to create a financial incentive for a patient to choose a higher-performing hospital."

On the other side, hospitals that improve significantly will likely receive higher payments. "While we have done actuarial work that can help employers understand the potential savings, at the end of the day, it will have to be negotiated," says Delbanco.

Efficiency, she notes, really is in the eye of the beholder. "The program allows for flexibility in terms of taking into account who gets incentives and who does not."

"If a hospital is a really good performer whose prices are sky-high, the employer can take that into consideration in deciding whether they really need to pay them more, or conclude that they have already captured their incentive based on price. This has to be customized, or employers might be in a position of doing something that is not actuarially sound," Delbanco adds.

The new program also offers great opportunities for quality managers, she says.

"This is an opportunity that has not existed before for hospitals to gauge how they are performing in five key clinical areas by a unique combination of data from Leapfrog and the Joint Commission," Delbanco asserts.

"It allows them to benchmark against their peers, as well as against hospitals across the nation. Part of the program involves sending the benchmarking data back to the hospitals."