Paying for Performance:
Emerging Evidence and Insights
Gary J. Young, J.D., Ph.D.*
Boston University School of Public Health
and
Center for Organization, Leadership and
Management Research, Department of Veterans Affairs
&
Doug Conrad, Ph.D.
University of Washington School of Public Health
*Financial support provided by Agency for Healthcare Research
and Quality and Robert Wood Johnson Foundation
What is
Pay-for-Performance (P4P)?
• Financial incentive
• Predefined performance target – efficiency,
productivity, QUALITY
• Target recipient – individuals, teams,
organizations
2
Over 100 P4P Programs
with Quality Targets
Examples:
• Excellus/Rochester Individual Practice
Association – individual physicians
• Blue Cross of California (PPO) -- individual
physicians
• Center for Health Care Strategies, Medicaid (CA)
– individual physicians and physician group
practices
• Blue Cross Blue Shield of Michigan – hospitals
• Centers for Medicare & Medicaid Services –
Medicare participating hospitals and physician
group practices
3
Why P4P?
• Quality problems
• Escalating costs – business case for
quality
• Managed care not a silver bullet
4
Will P4P Work?
• Evidence from manufacturing sector is
promising
• Evidence from health care sector is
both limited and mixed
5
What do P4P Programs Look Like?
6
P4P: Quality Target
• Chronic Conditions
Examples:
•HbA1c testing:
threshold
• Primary care providers
•Diabetic eye exam:
threshold
• Process-oriented
quality targets
(HEDIS)
•Mammography:
threshold
•Well-child visits: %
improvement
7
P4P: Target Recipient
• Group physician practice/IPA
• Hospitals
• Individual physicians
8
P4P: Financial Incentive Arrangements
• Cash lump sum bonuses
• Fee schedule adjustments
• PMPM bonus potential for total panel (e.g.,
$1.50 PMPM; $3.00 PMPM)
• Withhold adjustments
• Withhold/bonus hybrid
9
P4P: Payout Formulas
Components:
• Clinical quality measures (HEDIS, homegrown,
outcome control)
• Utilization – total medical expense trends
• Information systems
• Patient access and satisfaction
Scoring:
• Thresholds
• %Improvement
• Rankings
10
P4P: Non-Financial Incentive
Arrangements
•
•
•
•
Honor rolls and handshakes
Education resources and subscriptions
Internal peer comparisons
Public report cards
11
Rewarding Results
REWARDING RESULTS
DEMONSTRATION SITES
UNIT OF
ACCOUNTABILITY
GEOGRAPHIC
REGION
Blue Cross Blue Shield of Michigan
Hospitals
MI
Blue Cross of California
Individual physicians
San Francisco Bay
area
Bridges to Excellence
Individual physicians
& Group practices
Cincinnati, OH
Louisville, KY
Boston, MA
Albany, NY
Excellus/Rochester Individual Practice
Association (RIPA)
Individual physicians
Rochester, NY
Pay for Performance – Integrated
Healthcare Association
Group practices
CA
Local Initiative Rewarding Results –
Center for Health Care Strategies
Individual physicians &
Group practices
CA
Massachusetts Health Quality Partners
Group practices
MA
Blue Cross Blue Shield
of Michigan
• Scope
- 86 hospitals
- $31 million dollars
• Quality targets
- e.g., aspirin at arrival/discharge for AMI
- e.g., left ventricular ejection fraction for CHF
• Incentive
- DRG adjustment
• Payout formula
- clinical quality 60%, patient safety 30%, community
health 10%
- thresholds; total score multiplied by 4%
13
Excellus/Rochester IPA
• Scope
-  900 primary care physicians
- 400,000 HMO enrollees
- $17 million dollars
• Quality targets
- care pathways for diabetes, asthma, otitis media,
acute sinusitis, coronary artery disease
• Incentive
- 50 to 150% of withhold ( 10% physician’s annual income)
• Payout formula
- clinical quality 40%, utilization 40%, patient satisfaction
20%
14
- forced rankings
Integrated Healthcare Association
• Scope
- 7 California health plans
- 215 physician group practices
- 6.2 million HMO commercial members
- estimated $50 million dollars
• Quality targets
- 8 clinical measures (e.g., pap smear, mammography )
• Incentive
- annual payment to physician group practices PMPM
• Payout formula
- clinical quality 50%, patient satisfaction 30%, IT 20%
- forced rankings for quality and satisfaction; payout based
15
on percentile score (3 categories)
Provider Attitudes Toward P4P
• Survey: Over 2,500 randomly selected physicians in
two demonstration sites
- response rate: 50% of 573; 30% of 1,950
• Telephone interviews w/ physician practice leaders
(3 sites – 51 practices)
16
Survey Results:
Physician Attitudes Toward P4P in General
Strongly Disagree
Physicians should be rewarded
5.0 5.0
for higher quality care
12.4
Financial incentives are an
effective way to improve quality
17.0
7.9
Financial incentives are most
effective when linked to
5.5
individual MD performance
Efforts to achieve targets may
hinder provision of other
medical services
11.9
Neutral
20%
Stongly Agree
32.3
20.6
41.8
30%
12.8
46.9
43.3
10%
Agree
45.2
23.0
8.4
0%
Disagree
12.8
26.4
40%
50%
60%
18.8
70%
Percent of Respondents (n=844)
80%
90%
3.2
100%
Survey Results:
Physician Attitudes Toward P4P in General
Strongly Disagree
MDs are aware of financial
incentives
5.9
Financial incentives are most
effective when linked to
individual MD performance
5.1
Neutral
30.7
11.8
It is informative for MDs to
compare their performance with 1.2 7.9
peers
0%
Disagree
36.9
22.8
20%
Stongly Agree
21.1
46.6
14.2
10%
Agree
13.7
65.7
30%
40%
50%
60%
5.5
11.1
70%
Percent of Respondents (n=844)
80%
90%
100%
4
Survey Results:
Physician Attitutdes Toward A Specific Incentive Program
Mean Score with 95% Confidence Interval
Scale: 1=Strongly Disagree / 2=Disagree / 3=Neutral / 4=Agree / 5=Strongly Agree
3.8
Site A
Scale Mean (Min=1 / Max=5)
3.6
Site B
3.4
3.2
3
2.8
2.6
2.4
2.2
2
Aw areness
Salience
Clinical
relevance*
Control*
Fairness*
Unintended
consequences*
Feedback
Impact*
Interviews w/Group Practice
Executives
• Consistent attitudes about:
– Adequacy of dollars (new or old money)
– Complex distribution formulas
– Data quality
– Turnover of quality targets
– Availability of technology
• Divergent attitudes about:
– Awareness and involvement of physician
– Alignment of internal incentives
20
Emergent Interview Themes
from Health System Leaders
•
•
•
•
•
•
•
Organizational Strategy and Structure
Organizational Stability
Infrastructure
Quality Measurement and Data
Nature and Size of Incentives
Sustainability of Interventions
Institutional Culture
Incentive Design Principles
Principle 1: Create Broad-Gauged Incentives
• Structure
• Process
• Outcome
Incentive Design Principle 2:
Use a “Balanced Scorecard” for Physician
Incentives:
• Helps Avoid “Sub-Optimization” by
Providers
• Adds Credibility and “Gravity” to the
Incentive Stimulus
Incentive Design Principle 3:
• Absolute “Process” Performance Standards
Have Superior Incentive Properties:
– Greater Provider Controllability, Less
Dependence on Behavior of Other Providers
• Relative Performance Standards May Work
Better for “Outcome”
– Standardize for Common External Factors
– Easier to Pre-Budget Total Incentive Payment
Incentive Design Principle 4:
Physician Quality Incentives Must Be:
• Transparent
• Timely
• Accurate
• Controllable (by providers)
• Consistent (across major payers and over
time)
Incentive Design Principle 5:
The Effect of Incentive Size Is Complex:
• Must Be Sufficiently Large to Capture
Provider Attention (Overcome Inertia) &
Cover Costs of Adjusting Behavior
• Must Not Be Too Large to Sustain over
Time or So Large as to Erode Intrinsic
Motivation of Providers
Incentive Design Principle 6:
Channeling Patient Volume to High-Quality
Providers Can be a Strong Indirect Financial
Incentive for Quality:
• If Channeled Services Have Sufficiently Positive
Profit Margins
• In Market Areas with Sufficiently High QualityElasticity of Demand
• Reputational Incentives Must Be Defined Upfront
Incentive Design Principle 7:
High-Quality Patient Care Is a “Team Sport”
• Accordingly, Teams Must Be Rewarded as a
Part of Quality Incentive Programs
• Care Coordination Incentives Should Be
Explicit
• Questions on Patient Satisfaction Are an
Important Source of Perceptions regarding
Care Coordination
Incentive Design Principle 8:
Quality Incentives Should Form Part of an
Integrated Quality Improvement Program:
• Quality as a Strategic Organizational
Imperative
• Strong Clinical and Managerial Decision
Support for Quality Improvement (QI)
• Consistent, Credible Information Is Critical
to Implementing and Maintaining QI