P4P Pioneer

Physician pay-for-performance programs are not a new phenomenon in the healthcare arena. In one form or another, programs have existed in select markets for a decade or more, but momentum is building to develop a national model as more pro-jects—and more financial rewards—come online in communities across the country.

One successful project that is drawing a lot of attention is the pay-for-performance program developed and run by the California-based Integrated Healthcare Association, which now covers 225 medical groups and individual practice associations whose members care for 6.2 million Californians enrolled in seven different health plans. With three years of reporting experience and two years of payouts that have sent approximately $90 million in performance bonuses to physicians across the Golden State, the program is now one of the largest and most lucrative in the nation.

But is this the model that other regions should seek to emulate? Or do the idiosyncrasies of the California market—one dominated by several large HMOs with delivery networks composed of organized medical groups and IPAs operating under a capitated model—preclude replication in other regions?

Elements of success

“Is our program generalizable to other areas? I’d say certain aspects of it are for sure,” says Tom Williams, executive director of the Oakland-based IHA. “But there are many different approaches to pay for performance, so it really depends on the market and what folks are trying to achieve.”

Williams maintains that one of the keys to California’s success has been the use of uniform measures and aggregated data by all the participating plans. “One of the difficulties in pay-for-performance programs is obtaining a sufficient sample size to have statistically valid results,” says Williams, noting that by aggregating data, plans are able to double the number of groups that can be rated on all the performance measures.

The IHA program also has resulted in the production of a single statewide public report on medical group performance, which replaced the competing report cards that individual plans had been releasing to the public. That report is now produced annually by the California Office of the Patient Advocate. “One of the big difficulties previously was that you would have one plan report out and say that group A was excellent in this one category, then another plan might report out and say they were only average,” Williams recalls. “Now we not only have a uniform measure set and a large database, but we also have uniform reporting.”

One plan to lead them all?

One of the keys to the IHA’s success—and likely the piece that’s hardest to reproduce in other markets—is the level of collaboration it achieved from the major players: health plans, medical groups and purchasers.

“I think the IHA pay-for-performance program is not reflective of the direction this country is going nationally,” says Geof Baker, CEO of Med-Vantage Inc., a San Francisco-based health informatics company that has worked on multiple pay-for-performance programs. “The IHA’s consensus process was brilliant in its execution, but is highly challenging to replicate.”

Instead of bringing all the parties in a market together under a single initiative, Baker says he sees the concept of pay for performance developing nationally in a more pluralistic manner. “Different models are being tried out there in local communities, and they have different flavors,” he maintains.

A survey conducted by Baker’s firm last year found 107 sponsors of pay-for-performance programs nationwide as of November 2005, including 73 commercial health plans and 13 Medicaid-only plans. That number was up nearly 25 percent from the prior year when Med-Vantage’s survey found 82 pay-for-performance programs in operation.

But even with the high level of experimentation, Baker notes that there are a number of common elements among the pay-for-performance initiatives. Most programs pay at least a portion of their incentives for meeting a set of quality standards, which typically are process-based rather than outcomes-based measures. Programs reward groups for performance on cost metrics, he says, noting that a common measure is generic-brand substitution rates. And initiatives increasingly reward physicians for making investments in clinical information systems, such as electronic health records, patient registries and e-prescribing tools.

Growing measure sets

“The quality and process measures are very well-developed, particularly in primary care, but there is tremendous demand right now to develop a broader set of measures that go beyond HEDIS [Health Plan Employer Data and Information Set],” says Baker. In fact, he says much of his firm’s work is now focused on developing measures in the specialty arena—a trend that is surfacing in other initiatives.

Barbra G. Rabson, executive director of the Massachusetts Health Quality Partners, notes that with the successful release of its two initial public reports on quality—one measuring clinical performance at the medical group level and another rating patient experiences at individual practice sites—the group is working to rate patient satisfaction with specialty care. Based in Watertown, Mass., MHQP is a decade-old coalition of physicians, hospitals, health plans, purchasers, consumers and government agencies. Like the California initiative, MHQP’s report cards are compiled using aggregated data from five major health plans in the state. Unlike the IHA program, however, performance bonuses are not linked directly to the measurement set selected by MHQP. Instead, each plan developed its own performance measures and incentive programs using its own data, says Rabson, noting the group is also working to ascertain which types of incentives have the greatest impact on quality improvement.

“This is a perfect example of where the marketplace got way ahead of the research,” Rabson says. “There are all these incentives out there, and we don’t really know a whole lot about which ones are most effective.”

While the scientific case is still being made for various elements of the incentive programs, Michael Kelleher, M.D., medical director for quality and medical management for Fallon Clinic in Worcester, Mass., offers a more pragmatic assessment of pay-for-performance programs.

“The amount varies by payor, but in round terms we have a couple million dollars pegged to these performance metrics,” he says, noting that the programs have expanded from simple HEDIS measures to now include incentives for meeting patient-satisfaction rates, adopting new clinical information systems and e-prescribing tools, and running cost-efficient practices. “That is certainly enough to get the attention of our physicians and to motivate us.”

Brad Cain is editor of California Healthfax and associate editor with HealthLeaders. He may be reached at bcain@healthleadersmedia.com.