1. Rewarding Performance: Three-Year Results from California's Statewide Pay-for-Performance Experiment Cheryl L. Damberg, PhD, Kristiana Raube, PhD, Stephanie Teleki, PhD, and Erin dela Cruz June 5, 2007 Financial support provided by the California Healthcare Foundation

2. Academy Health, 2007 Presentation Topics Presentation Topics  IHA Pay-for-Performance program design  Year-to-year changes in performance scores  Physician group responses to P4P post 3 rd incentive payment  Conclusions

3. Academy Health, 2007 Evaluation of the IHA P4P Program  A 5-year evaluation to assess the impact of the IHA P4P program on:  Changes in performance over time  Changes in payments and the distribution of payments over time  The relationship between structural characteristics and performance scores  Physician group responses to the incentive program  Leadership interviews with physician groups

4. Academy Health, 2007 IHA P4P Program  A statewide collaborative effort among:  7 major health plans and 225 medical groups  12 million commercial HMO and POS enrollees  Measurement started in 2003 for 1 st payout in 2004  3 rd payout occurred late summer 2006 Design Elements Unit of payment Medical groups (n=225) # of measures 17 (clinical, patient experience, IT capability) Data source Administrative (plan or medical group self-report) Min of 3.25 encounters PMPY Earning potential Avg. bonus of 2-3% of cap (~$2.50 per member per month) Scoring method Most plans use relative rankings Transparency Full transparency

5. Academy Health, 2007 Performance Measures MY Year 2005, Payout 2006 Clinical  Asthma management  Childhood immunization (MMR, VZV)  Cancer screening (breast, cervical)  Diabetes (HbA1c measure and control)  LDL (screening and control: 03 cardiac; 04 cardiac and diabetic) Patient Experience  Timely access to care  Doctor-patient interaction/communication  Specialty care  Overall ratings of care IT Capability  Integrate clinical electronic data for population management  Clinical decision making support at point of care through electronic tools

6. Academy Health, 2007 Weighting of Measures in Payout Formula Payout Year 2004200520062007 Clinical Measures 50%40%50%50% Patient Experience with Care 40%40%30%30% IT Capabilities (add systemness measures in 2007) 10%20%20%20% Total100%100%100%100% Individual physician Feedback program (optional add on bonus) xx Year-to-year improvement (optional in 06; begins 07 for all plans) x

7. Academy Health, 2007 Changes in Payouts: 2004-2006 ∆=47% increase in IHA portion

8. Academy Health, 2007 Total Payments to Physician Organizations* 2004 vs. 2005 * Note: Truncated to groups receiving less than $2 million

9. Academy Health, 2007 3-Year Performance Changes 2003 (2004 payout) to 2005 (2006 payout)

10. Academy Health, 2007 Modest Changes in Patient Experience Scores Measure20032004 Mean Difference Rating of Health Care 70.0%71.4% 1.4%** 1.4%** Rating of Doctor 80.0%80.7% 0.5% 0.5% Rating of Specialist 71.0%71.9% 0.8% 0.8% Doctor Communication 85.6%87.0% 1.3%*** 1.3%*** Timely Care and Access 69.5%70.2% 1.4%*** 1.4%*** No Problem Seeing Specialist 59.5%61.3% 2.2%*** 2.2%*** Statistically significant at *** p<.001 ** p <.01; * p <.05

11. Academy Health, 2007 Asthma: All Ages Reduction of 5.6% points in variation 21% point gain in performance

12. Academy Health, 2007 Breast Cancer Screening Reduction of 2.3% points in variation 3.5% point gain in performance

13. Academy Health, 2007 HbA1c Screening Reduction of 19.8% points in variation 7.7% point gain in performance

14. Academy Health, 2007 Diabetes HbA1c Screening: 2004 vs. 2005

15. Academy Health, 2007 Breast Cancer Screening: 2004 vs 2005

16. Academy Health, 2007 IT adoption increases each year By 2005, 33-44% of Groups and 68-76% of Patients Had Data Integration Technology

17. Academy Health, 2007 More IT Functions are Adopted By 2005, 1-39% of Groups; 20-64% of Patients had Point of Care Technology

18. Academy Health, 2007 Physician Organization Responses to Pay for Performance: Findings from Leadership Interviews

19. Academy Health, 2007 Physician Organization Responses to the Incentive Program  Second round of interviews with physician leadership (3 years into program)  Study population: 35 physician organizations (POs) out of a universe of 225 in CA ( n=29 completed to date )  Cross section of groups  High, medium, and low performing Pos  Reflects the spectrum of “winners and losers”  Large and small POs  Reflects resource constraints  Rural and urban POs

20. Academy Health, 2007 Support Quality Focus, but Face Constraints Most said the organization provides support to addressing quality Most said the organization provides support to addressing quality  Mean score = 4.0 (1 to 5 scale, with 5 = a lot of support) Biggest constraints to improving quality: Biggest constraints to improving quality:  Technology challenges, such as lack of EMR  Changing physician behavior  Data issues, such as data integration, missing information, etc. POs feel they are moderately successful in monitoring their quality performance POs feel they are moderately successful in monitoring their quality performance  Mean score=3.7 ( 1-5 scale, with 5 = very successful)

21. Academy Health, 2007 Is the Current Incentive Level of 1-2% of Capitation Right?  Among those earning incentives, the amount was 2% or less as a percentage of total capitation payments  Mixed results on +/- ROI  Widespread support for increasing incentives to 5- 10% of capitation payments (26 out of 29 POs agreed)  This level would increase attention, provide a positive ROI and defray set-up costs  Some POs noted current levels have gotten their attention and urged them to make changes

22. Academy Health, 2007 Most POs Believe P4P Affects Organizational and Physician Behavior Increased organizational accountability for quality Increased organizational accountability for quality  New project managers, quality support, and medical directors Improvements in data collection, including IT adoption Improvements in data collection, including IT adoption  IT and data support staff  Data mining capabilities  EMRs, hardware, software, and web interfaces Physicians are more directly managing patients and working with administration to improve quality Physicians are more directly managing patients and working with administration to improve quality  Bonuses tied to quality  Outreach to physicians; clinical and patient satisfaction guideline review

23. Academy Health, 2007Conclusions  Modest positive changes occurring for most measures  Combination of quality improvements and improvements in data capture  Data capture continues to challenge small groups and some IPAs  Challenges of how to improve patient experience  Performance payments have grown slowly over time  $$ at risk for performance are still a small fraction of total payments  Current level of incentives isn’t high enough to really get attention of physicians  Hard to incentivize specialists given absence of measures

24. Academy Health, 2007 Will P4P Solve the Cost and Quality Problems in the U.S. Health System?  Improving the reliability of care received from current level of one-sigma to six-sigma?  Slowing the growth in healthcare costs to the rate of growth in the GDP or general level of inflation?  Reducing the number of deaths from medical errors from estimated rate of >100,000/year to below 5,000/year?  Unlikely in near term  Need for other policy levers in conjunction with P4P (e.g., broader performance measurement, transparency, investments in information systems)