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Medicare News
Pay-for-Performance Incentives Used for Physicians
and Hospitals by Most HMOs
Medicare eyeing this system by 2009 to increase
healthcare quality
 November 6, 2006 "Pay-for-Performance" is a term
most senior citizens are not familiar with in their healthcare setting,
but this concept of basing financial rewards for doctors and hospitals
on their ability to meet certain goals is projected to become a
part of how Medicare does business by 2009. Most HMOs are already using
this compensation system, according to the Agency for Healthcare
Research and Quality.
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AHRQ, an agency in the government's massive
Department of Health & Human Services, which also includes the Centers
for Medicare & Medicaid Services, has been regularly monitoring the
development of this system of incentive-pay. The agency's most recent
survey found more than half of the nations HMOs used
pay-for-performance programs in their contracts with doctors and
hospitals in 2005.
More specifically, the study, which was being
published in the November 2 issue of the New England Journal of
Medicine, found that nearly 90 percent of those included these
arrangements as part of their physician compensation and more than
one-third of HMOs with these programs included them in their hospital
contracts.
Pay-for-performance arrangements are an
increasingly popular way for payers to reward doctors and hospitals for
adhering to evidence-based standards of clinical care, says AHRQ.
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What is Pay-for-Performance |
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Pay-for-performance (P4P) programs are
designed to offer financial incentives to physicians and other
health care providers to meet defined quality, efficiency, or
other targets.
The Agency for Healthcare Research and
Quality says this may be defined as "a strategy to improve
health care delivery that relies on the use of market or
purchaser power. Pay for performance, depending on the context,
refers to financial incentives that reward providers for the
achievement of a range of payer objectives, including delivery
efficiencies, submission of data and measures to payer, and
improved quality and patient safety."
Health plans, large employers, and other
purchasers of health care services, including Medicare and
Medicaid, seek evidence on what works and what does not work in
pay for performance, including what benchmarks to use and how to
structure incentives to promote and sustain quality improvement.
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According to the study findings, these arrangements
are more often associated with HMOs that use primary care physicians as
gatekeepers to specialty care, use capitation arrangements that give
primary care doctors set payments each month based on the number of
patients they have in a given health plan, or are themselves rewarded by
performance-based incentives.
This study is the first to assess the prevalence
of pay-for-performance programs among HMOs and describe how they are
used among physicians and hospitals, said AHRQ Director Carolyn M.
Clancy, M.D.
The findings are exceedingly valuable and come at
a time when the federal government is beginning to develop a value-based
hospital payment system for Medicare enrollees, she said.
Researchers from the Harvard School of Public
Health and Harvard Medical School in Boston surveyed health plans that
offered commercial HMO products in 41 U.S. markets with at least 100,000
HMO enrollees.
The markets in the sample represented 91 percent of
U.S. HMO enrollees and 78 percent of the U.S. metropolitan population.
Health plan respondents generally included medical
directors or directors of quality management. They responded to a
series of questions about characteristics that might be associated with
the use of pay-for-performance arrangements and their scope and
structure.
For example, information pertaining to physicians
participation in pay-for-performance programs focused on the magnitude
and structure of incentive payments, the types of performance indicators
included (clinical quality, patient satisfaction, information technology
and cost/efficiency), and whether physicians practiced individually or
as a group.
For hospital pay-for-performance programs,
researchers asked about three specific measures promoted by the Leapfrog
Group, a quality improvement organization. Those measures included
● intensive care unit staffing,
● use of computerized physician order entry systems, and
● volume standards for high-risk procedures.
Of the 242 HMOs surveyed, 52 percent said they used
pay-for-performance in provider contracts in 2005. The 126 HMOs using
these programs represented 81 percent of enrollees in the sampled plans
(average enrollment in each sample plan was 323,553).
Nearly two-thirds of HMOs that require the majority
of enrollees to designate a primary care physician as a gatekeeper to
specialty services used pay-for-performance programs, compared with 25
percent of HMOs that do not require the majority of their enrollees to
select a primary care physician.
Among 113 HMOs using pay-for-performance programs
for physicians, 13 percent focused on the individual doctor as the unit
of payment. One-third of programs were designed to reward only the
top-rated physicians or physician groups. Nearly two-thirds offered
rewards for attaining a pre-determined performance threshold. The bonus
potential for physicians in these programs was generally equal to 5
percent of payments from the plan.
Nearly all health plans with physician programs
included measures of clinical quality (100 percent of capitated plans;
79 percent of non-capitated plans). Use of information technology and
patient satisfaction measures were relatively common elements of
physician incentive programs, the study found.
Although 38 percent of health plans said they used
pay-for-performance programs in hospital contracts, use of Leapfrog
Groups measures was relatively low. Nearly three-quarters of HMOs said
they relied on other measures of hospital quality.
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