Pay for Performance (PFP) is a method of linking pay to a measure of individual, group or organizational performance, based on an appraisal system. These types of bonus incentive schemes are based on the idea that work output, determined by some kind of measuring system, varies according to effort and that the prospect of increased pay will motivate improved performance.
CMS is pursuing a vision to improve the quality of care by expanding the health information available through direct incentives to reward the delivery of superior care.
PIPDCG to be instituted 2006
Principal Inpatient Diagnosis Cost Groupings
Several versions of risk adjusters , Medicare version is our example
Beneficiary lives in a county with a monthly rate of $500.00 PMPM has a relative risk factor of 1.10. Medicare pays the managed care plan $550.
At first 10% of payment is PIPDCG and 90% is historical AAPC but in three to 5 years this changes to 50% risk adjuster and 50% AAPC
2006 is here, this is what the regulations say
In 2006, MA organizations will continue to be paid on a monthly basis under the new methodology for plan bids. The specific amount of payment for MA organizations (except MSA plans) will depend upon the plan’s bid-to-benchmark comparison. CMS will make advance monthly payments to an MA organization for each enrollee for coverage of original Medicare fee-for-service benefits in the plan payment area for the month, using the new bidding methodology
If the plan’s risk-adjusted basic Part A/B bid is less than the risk-adjusted benchmark, the plan’s average per capita monthly savings would equal 100% of that difference and the beneficiary is entitled to a rebate of 75% of this plan savings amount. The other 25% remains in the Medicare Trust Fund. The plan is paid its bid amount, subject to adjustments.
If the plan’s risk-adjusted basic Part A/B bid is equal to or greater than the risk-adjusted benchmark, the plan receives no rebates, and payments are made based on the benchmark for the geographic service area, adjusted for risk using the appropriate enrollee risk factor.
Quality Chasm calling for system redesign
Overpayment and fraud cases at an all time high ( auditors hard at it)
Current program under-funded due to demographics
New technologies more prevalent (TPA, drug eluded stints)
Rising charges ( 60% overall increase over 5 years)
Unnecessary care ( Hospitalizations and ER that could have been avoided or better handled through physician visits/hospice/home health)
Social and economic barriers to preventive care that produce expensive admissions
Institute Of Medicine Findings
“Serious and widespread quality problems exist in American medicine… [They] occur in small and large communities alike, in parts of the country and with approximately equal frequency in managed care and fee-for-service systems of care. Very large numbers of Americans are harmed as a result (Chassin and Galvin 1998:1000).”
The IOM Studies Report to the National Business Roundtable on Quality Health Care Says:
Institute Of Medicine Findings
Examples cited include:
Fewer than half adults aged 50 and over were found to have received recommended screening tests for colorectal cancer (centers for Disease Control and Prevention 2001, Leatherman and McCarty 2002)
Inadequate care after a heart attack results in 18,000 unnecessary deaths per year (Chassin 1997)
In a recent survey, 17 million people reported being told by their pharmacists that the drugs they were prescribed could cause an interaction (Harris Interactive 2001)
Market Expansion and Cost of Specialty and Biotech Drugs Will Continue to Accelerate
--Specialty drugs are highly sophisticated protein structures derived from recombinant DNA technologies most often given by injection or infusion.
---Nearly 200 of these drugs will be on the market by end of 2005 with estimated product revenues of nearly $50 billion. An additional 600 drugs are in development.
--The average cost per prescription of the biotech drugs now exceeds $1,000 per month, compared to $45 for other drugs; drugs such as Avastin (colon cancer) costs $50,000 yearly; Cerazyme (Gaucher's disease) costs $250,000 yearly.
Publication: State of the Union: Industry Overview for Medical Directors, presented by Samuel R. Nussbaum, M.D., Executive Vice President and Chief Medical Officer, Wellpoint, Inc.,
Roller Coaster of drug costs
Insurance Market changes
The number of people with health insurance coverage increased by 1.0 million in 2003, to 243.3 million (84.4 percent of the population). --An estimated 15.6 percent of the population, or 45.0 million people, were without health insurance coverage in 2003, up from 15.2 percent and 43.6 million people in 2002. --The percentage and number of people covered by employment-based health insurance fell between 2002 and 2003, from 61.3 percent and 175.3 million to 60.4 percent and 174.0 million.
Finessing cost and quality of care can be a difficult balancing act. Simply throwing money at the problem isn’t always the answer. In fact, there is a point at which spending more does not necessarily improve quality.
How do I know which disease/condition I should focus on for disease management?
Prevalence and Cost Report
Which condition has the highest prevalence and costs that we do not have a DM program for?
Are the members with this condition being compliant with the clinical and utilization measures?
How does this population break down with regard to predicted costs distribution?
How does our population map out with regard to severity for this condition?
Projected DCG Cost Stratification Summary Report
Clinical Severity Trend
What is the trend in our population over time? (number of episodes and costs with each disease stage)
How many members with this condition will be predicted to be high cost next year?
What is the average rate of compliance for each clinical and utilization measure?
The Right Care The Right Time
A recent study of 15,732 short-term disability claims suggests that cost-containment measures by insurance carriers - such as denying or postponing needed surgery - can cost employers more money than it saves them. The study compared musculoskeletal claimants who received surgical intervention with those who did not. Some of the most notable comparisons:
Surgical patients with a rotator-cuff tear lost 5.3 weeks of work versus 12.2 weeks for nonsurgical patients
Patients with lower-back stenosis who underwent surgery averaged 10.3 weeks of recovery versus 15.9 weeks for nonsurgical patients
Patients with a meniscus tar of the knee who had arthroscopic repair lost 5.2 work weeks versus 9.7 weeks for nonsurgical patients
Source: Employers on Health 2002.
Approaches Tried by Hospitals & Health Systems
Attempts to “make it easy” by creating standards and reporting doctors who do not meet them to health plans
Waiting for the government to do everything
Misunderstanding about the value of this data
Genuine disregard for physician individual differences in
treatment and experience
Hospitals Should Be Asking…
Can I afford to take a 2% hit on my leading specialties?
If I show up on the watch list what will happen to my other managed care contracts?
What is the impact of this consumer shift?
What is the impact on physicians?
What about antitrust if I drop capitation?
Hospitals can make money at P4P today if they focus
Health plans in the Integrated Healthcare Association, a California-based coalition of health plans, physicians and others, have seen improvement across the board in quality measures such as breast cancer screening, cholesterol management and diabetes screening and management.
Blue Cross Blue Shield of Michigan says its hospital-based incentive program has decreased rates of life-threatening infections by 45 percent for patients in the intensive care unit.
Anthem Blue Cross and Blue Shield in southern Ohio says its P4P program helped increase preventive measures among asthmatic members from 28 percent in 2003 to 84 percent at year-end 2004. And Anthem has paid out $6 million to hospitals in Virginia for meeting performance goals regarding patient safety and health outcomes.
Hospital system Indianapolis is delighted with a 2% margin above projected in 2002 for Anthem in this growing market.
Revisiting Integration in a Post-Medicare Reform Era
As capitation is dropped by hospitals and systems the exposure to challenge by health plans increases.
Why? because without financial or clinical integration providers are NOT permitted under the law to collectively negotiate with insurers.
To replace capitated contracts with a Pay for Performance approach is a step in the right direction but without clinical integration standards being met the hospital and its physicians are still subject to investigation.
Can you really prove your intention is to produce better quality?
Can you really prove that what you are doing has a community benefit?
For consumers, a means to evaluate care effectiveness and efficiency
For employers a means to determine value of services
For health plans a method to redirect patients to high quality low cost providers
For the fed, a way to lay off risk to plans and providers
What About the Private Sector?
Medicare is moving quickly to adopt a Pay for Performance system to improve quality and lower cost
Will managed care companies do this?
Will large employers do this?
Will TPAS and insurers move this way?
Did the private market adopt DRGs? RBRVS? APCs?
Then why would they not do this as well?
Will Health Benefit Costs Eclipse Profits?
2 3 3
Health Benefit Expense
as Percentage of Corporate After-Tax Profits
Source: US Bureau of Economic Analysis; US Bureau of Labor Statistics; CMS; McKinsey Analysis.
Health Benefit Expense
Declining-Profits Scenario 1
Low-Growth Scenario 1
1 Declining-profits scenario assumes 2% annual decline in profits; low-growth scenario assumes 2% annual growth in profits; both scenarios assume 7% annual growth in health benefit expense.
2 Estimated. 3 Forecast.
People with Chronic Conditions Account for 83% of All Health Care Spending
Eighty-three percent of health care spending is attributed to the 48% of the non-institutionalized population that has one or more chronic conditions.
Seventy-four percent of private health insurance spending is attributed to the 45% of privately insured people who have chronic conditions
Seventy-two percent of all health care spending for the uninsured is for care received by the 31 percent of the uninsured with chronic conditions
Eighty-three percent of Medicaid spending is for the almost 40 percent of non-institutionalized beneficiaries with chronic conditions.
Source: Medical Expenditure Panel Survey, 2001. Publication: "Chronic Conditions: Making the Care for Ongoing Care, September 2004 Update," prepared by Partnership for Solutions, a national program funded by the Robert Wood Johnson Foundation, based at Johns Hopkins University.
Health Plans & Employers
Now understanding Chronic Conditions are a key element to manage, and if possible reverse
Health plans continue to use DM but with uneven results
Benefit design and network size are tools to correct the problem
Overuse And Misuse …
Yet P4P is a Sweet Spot for Some Employers
Source: Employer Benefits Research estimates.
1 2 3 4 5 6
CABG at ‘5 star’ facility
Admits to Hospitals
Cardiac Admits to Quality Centers
Outpatient Cardiac Care
Timely Pay of Worker’s Comp
Web & IVR Availability
$7 MM Opportunity
$3 MM Opportunity
$6 MM Opportunity
$60 MM Opportunity
$15 MM Opportunity
$20 MM Script Days
$16 MM Script Days
Are Premium Increases Slowing?
Health Care premiums have risen 73% since 2000
Annual Premiums for family coverage reached $10,880 in 2005
Average worker paid $2,713 toward premiums for family coverage in 2005 (26% of total health premium)
In 2005, Average worker is paying $1,094 more in premiums for family coverage than in 2000
Source: The Kaiser Family Foundation/Health Research and Educational Trust 2005 Annual Employer Health Benefits Survey, September 2005.
The Disease/Health Continuum
Health is a continuous variable, according to George Isham, MD, HealthPartners Medical Director and Chief Health Officer. A person is not simply healthy or sick; there are various degrees of health. The Partners for Better Health program tries to move members along the disease/health continuum, toward lower risk and greater health through prevention.
Source: HealthPartners, Partners for Better Health.
The Hope of Pay for Performance Is That It Will Change the System From Bottom up
Emotional response by the patient when expectations are not met becomes the motivator of change by physicians.
Description: The rates represent the percentage of members with a diagnosis of coronary artery disease (CAD) age 18 through 75 who have optimally managed modifiable cardiovascular risk factors (LDL cholesterol <130 mg/dl, blood pressure <140/90 age 60, <160/90 age >60, taking one aspirin per day, lipid medication for members with LDL 130 mg/dl and documented non-tobacco use).
Methodology: The study population includes members from all products who were continuously enrolled from January 1 to December 31, 2002, and who had a visit with a CAD diagnosis between 1/1/01 and 12/31/02. Population identification is based on encounter, claim and membership databases. All members within the population who have risk factors assessed and are in control during the reporting year are included in the rate calculation. This measure includes a statistically significant sample of up to 92 members (80 + 15% oversample) for each medical group. The members optimally managed rate reflects a combination of administrative and chart abstracted data.
Description: The rates represent the percent of surveyed members who recall receiving healthy lifestyle advice for their child regarding exercise, nutrition and second-hand smoke exposure during the past year.
Methodology: Healthy lifestyle advice status was determined through a mail survey conducted by HealthPartners Research Foundation in October, 2003. The measures include a random sample of up to 100 commercial members, 18 through 64 years of age from 38 primary care medical groups. For the children’s survey, the adult most knowledgeable about the children’s medical care was asked to complete the survey. The data were weighted to equal sample sizes of 85 for children and to control for self-reported health status.
Measurement 1 - Members Up to Date: The percentage of members who recall receiving all components of healthy lifestyle advice: exercise advice, nutrition advice and second-hand smoke advice for their child.
Measurement 2 - Completion Rate by Service: The completion rate for each specific healthy lifestyle advice component.
Member Survey - October 2003
Healthy Lifestyle Advice: Children
Total Members Sampled: 2,554 Total Members Up to Date: 1,403
Members Up to Date: 54.9% ( 4.5)
Rate by Service: 1. Exercise Advice 59.5% ( 3.9)
2. Nutrition Advice 69.3% ( 4.0)
3. Second-hand Smoke Advice 1 62.5% ( 13.6)
1 Graphic display of medical group rates for this measure is included in the Tobacco Rates - Member Survey section.
Research hospitalists results using new guidelines
Enforce guidelines through compliance audits, fines, payment adjustments or decredentialing
Performance Based Reimbursement
Disease Management Committee of medical group
Implement results oriented workplan
Apply guidelines on physician and department basis
Enforce guidelines through education, communication and, if necessary, economic sanctions
Outsource major data needs not now present in MSO
Upgrade specifications to fit medical management model
“Premium Network” Is Leveraged to Obtain P4P at Existing Health Plans
What Employers Want
A “go to” person at the hospital to resolve issues
Regular updates on efforts to improve care
Input into the process to the extent that they see accountability and leadership
Some tangible way to measure value
What Employers Do Not Want (and Are Getting)
Expensive insurance with no cause or justification
Insurers telling the employers the physicians and hospitals are overpriced and buying technology “like a drunken sailor”
Employers are tired of the blame game
They want a quality leader to emerge and Prove they are getting value
But this is changing
Employer Strategy As a Means to Pay for Performance-based Contracting
An example of a collaborative approach by independent physicians in Indianapolis
Physicians and employers working together keeps hospital politics to a minimum
New products are helping to expose consumers to the need for data
The Gateway – Indiana Employers Quality Health Alliance
A Physician – Employer Partnership
Used with permission
Improve the health of community.
Bring physicians and employers together to create community-based reform.
Increase the quality and efficiency of health care.
Reduce annual increases in healthcare costs through development of an informed partnership of patients, employers, physicians, hospitals, and others with a vested interest by aligning economic incentives and measuring clinical and financial performance.
A Fully Integrated Solution
Risk Assessment Screening
Health Care Purchasing
Physicians Determine Quality Measures by Specialty
Separate quality measures for chronic disease management.
Quality ratings measured and adjusted annually
Quality Criteria Posted to the Gateway web site
Physician Tier or Ranking Posted to the Gateway Web Site
Quality Health Alliance
Reimbursement adjusted by market for cost of living differences using MSA data.
Reimbursement adjusted by market for cost of living differences using MSA data.
Gateway’s current case rate or equivalent – 10% more than the Current Market
Initially estimated to be the top 20% to 30% of physicians by specialty in the local market defined by metropolitan statistical area.
No patient out-of –pocket expense to create steerage.
Current Market reimbursement - Ninety Percent of the Case Rate
Cost Sharing Applies – Patient Pays 20% of the Allowable
The middle 60% of physicians sorted by specialty.
All Others not included in Tier 1 or Tier 2
Seventy Percent of the Case Rate – Approximately 15% Less than the Market
Higher Patient Cost Sharing, most likely 50%, with Balance Billing
All physicians, hospitals and facilities which are not contracted and those who do not fall in Tiers 1 and 2. This group will also include physicians, hospitals and facilities whose volumes are less than minimal thresholds defined by literature and professional societies; and, facilities which do not meet safety criteria defined by literature and professional societies, i.e. Cardiac catheterization labs without on-site, surgical back-up.
Physicians and hospitals not reporting quality data
Quality Health Alliance
Benefit Plan Design Tiered to Reward Higher Quality:
Benefit Plan Design:
Benefit Plan Design:
Employers encouraged to offer wellness programs
Use Incentives, along with 100% coverage, to encourage participation in screenings, risk assessments and programs to reduce risk.
Plan design to discourage inappropriate access of the healthcare system through higher patient cost sharing
Quality Health Alliance
Plan 1 Plan 2 Plan 3 Plan 4 Plan 5
Access Fees $2.50 $2.75 $3.00 $3.25 $3.50
Wellness Program* 100% Participation No Screening
Access Fees Low Risk High Risk
Plan Design Incentives to Steer Business Absence of & Support Patient Compliance Incentives
* Screening/Risk Assessment/ Health Advocacy Coaching
Quality Health Alliance
Gateway Physician Tiers
Quality Index is reference for Gateway Physician Tiers
Tier 1 Superior Clinical Skills
Tier 2 Clinical competence
Tier 3 Not yet completed Quality Assessment or Quality Issues Identified that need resolution
Physician Reimbursement Determined by Physician Quality Ranking
Case Rates Apply to top 200 procedures
Some Office Based Care Paid by Case rates
All other care which is not case rated paid fee-for-service
Patient Experience Survey results interpreted by Quality Specialty Committee
All Quality Metrics are converted to a numeric value
Relative importance of each Quality Metric is determined by the Quality Specialty Committee (weighting)
Individual Physicians completing the Gateway Quality Assessment are assigned a Quality Index reflecting the Quality Score of that Physician relative to the ambient medical community
What Are the Barriers
Misunderstanding about what is good performance
Limitations of most data systems that are focused on revenue maximization and billing or claims data that is limited in focus and application
Employers view that hospitals excessive charges and lack of cooperation are still the problem
Lack of delivery system cooperation and leadership, lack of true integration creates further distortion of what excellence is and represents a liability as Antitrust rules are enforced
Disadvantages of Pay for Performance
What are the guidelines for physician and hospital use and are these severity adjusted so we do not get stuck with bias measurements? Do we have input?
Are the payers using unpaid or paid claims experience and are they comparing this performance to a national or regional database? Can we trust these plans?
Do we, as providers, have a data system that can track these physicians and hospital and pharmacy and ancillary encounters and events into a single episode of care ? We cannot even get docs to cooperate with APC billing!
Is there an incentive for physicians to keep scores high by turning complex patients away?
Advantages to Pay for Performance
Less denials for medical necessity because guidelines are establish up front based upon evidence based protocols and adjusted for severity.
Less denials for payments because outcomes are tied to groups of services tied to diagnosis so the provider has the advantage of having the diagnosis approved and therefore the budget of services for that diagnosis is clear-cut
Some serious incentives here to get some accurate coding, documentation and billing done versus today's extra hassle factor mentality.
Physician performance improvement is going to propel the P4P movement and consumers individual needs are going to outweigh insurance companies capabilities
Employers and physicians need to get together to create the performance based system of the future
Hospitals greatest opportunity is to facilitate this change