Paying for Quality in
Integrated Health Systems
Douglas Conrad, PhD
Barry Saver, MD, MPH
Beverly Court, MHA
Sarah Heath, MA
University of Washington
Participating CHMR Study Systems
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Catholic Health Initiatives
Exempla Healthcare
Sharp Healthcare
Summa Health System
Sutter Health
Swedish Health System
Trinity Health System
Veterans Health Administration (VISN 23)
Virginia Mason Health System
Washington Hospital Healthcare System
Funded by the Center for Health
Management Research
QualityIncentivesJuneQualityIncentivesJune-7-2004
Surveys & Key Informant
Interviews
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22 medical groups
6 IPAs
10 major system hospitals
Interviews included:
– medical group administrator and medical director
– IPA administrator and medical director
– Hospital CEO, CNO, & CMO
• Interviews focused on environmental and market
forces, quality incentives, and QI initiatives
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Findings – Experience with
Quality Measures & Incentives
• Little incentive experience (median bonus
income [quality and other] <1% of total revenue);
P4P just starting in CA, no $ received yet
• Past/current incentive programs generally
ineffective- small incentives, often “black box”
quality measures, no consistency across plans
• Current public (e.g., web
- based) reports viewed
skeptically – often black box measures, data
sources often unknown or inaccurate
• Organizations debate whether to publicize or
ignore when get good ratings
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QualityIncentivesJuneQualityIncentivesJune-7-2004
Findings – Views about External
Quality Measures
Findings – Views about External
Financial Incentives
• Quality measures must be transparent –
clear, measurable, meaningful
• Quality measures need to fit organizational
priorities for quality
• Need to be consistent across plans – even
P4P consistency may not be enough
• External incentives must align with internal
incentives
• If substantial resources needed to measure or
achieve goals, incentives have to be “big enough”
• Some question the appropriateness of financial
incentives for quality – “We aren’t paying you to
deliver poor quality, so why should we have to pay
you more to do it the right way?”
• Financial stability a prerequisite for considering
major changes, particularly large investments such
as an EMR
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Findings – Views about Internal
Financial Incentives
• Cultures of most large organizations rely on
intrinsic motivation – many leaders question need
for/appropriateness of large provider incentives
• Small groups (e.g., IPA members) tend to feel
significant financial incentives needed to change
provider behavior
• Productivity payment a barrier to quality incentives
• Internal measures/incentives must be transparent,
data accurate and timely
Findings – Organizational Factors
• Leadership is critical
• Teamwork & collaboration drive quality
• Affiliation with a large organization facilitates
quality improvement – “deep pockets” for
infrastructure investments, organizational culture
• Some IPAs trying to function as large groups –
e.g., create culture, centralize QI – but
significant barriers exist
• Hospital and medical group efforts often not
coordinated, even where incentives are aligned
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QualityIncentivesJuneQualityIncentivesJune-7-2004
Implications: “Design Principles” for
Quality Incentives
1) Transparency (measurability, legitimacy
and clinical coherence) of quality metrics
is crucial to success
2) Consider where to use relative vs.
absolute measures
3) Align rewards on multiple dimensions:
structure, process, and outcome
4) Emphasize processes under provider
control
QualityIncentivesJuneQualityIncentivesJune-7-2004
Incentive Design Principles
(concluding)
5) Design incentives to reward teamwork
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Quality is a “team sport”
6) Balance financial incentives as “extrinsic”
motivators with attention to “intrinsic”
motivators
7) Use “channeling” mechanisms to
enhance quality competition & qualityelasticity of demand
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