2009 CEO Forum Paying for Performance: Experience, Evidence and Future Prospects Kananaskis, Alberta February 16, 2009

“There is abundant evidence that serious and extensive quality problems exist throughout American medicine.” Institute of Medicine

Leapfrog Reports Adherence To Its Four Measures

CMS is Reporting Quality Indicators on >4000 Hospitals

Public Reported HEDIS Measures have Often been Associated with Increasing Quality of Care HEDIS 2000 HEDIS 2006 Beta blocker after MI85%97% Diabetic Hb Alc Testing75%88% Cholesterol Screening69%82%* Anti Depressant Tx Continuation42%45% Breast Cancer Screening73%72% Advising Smokers to Quit66%71% *2005

Improvements in Quality of Care For Medicare Beneficiaries to Were Small Smoking Cessation Counseling40%43% Aspirin at Discharge85%86% ACE Inhibitor Therapy for CHF71%74% Antibiotics in < 8 hours for pneumonia85%87% Source: Jencks et al JAMA 2003, Jencks NEJM 2003

Four Forces that Underpin Support for Pay for Performance Changing views of quality of care and public reporting Promise of information technology –Reduce errors and costs –Facilitate population management –System redesign and IT infrastructure are costly Lack of consensus on payment design Perception that paying for quality makes sense

Not Paying for Quality of Care is Un-American

King Hammurabi B.C

“If a doctor has opened with a bronze lancet an abscess of the eye of a gentleman and has cured the eye, he shall take ten shekels of silver” “If a doctor has opened with a bronze lancet an abscess of the eye of a gentleman and has caused the loss of the eye, the doctor’s hands shall be cut off”

Existing Models Reflect Broad Range of Payment and Ambition Modest payments for a few discrete measures demonstrate concern about more than cost Large financial incentives to provoke redesign of systems and investments in IT

Example 1: Highmark Blue Cross (PA) Initially, rewards for process measures– diabetes, cancer screening, cholesterol screening, beta blocker treatment Rewards for satisfaction, electronic connectivity, access Physicians in the top 50% received variable rewards ranging from 1% bonus for 50 th to 59 th percentile to 5% for the 85 th to 100 th percentile

Example 2: Highmark Blue Cross (PA) 2007 Payment based on accruing up to 115 Points –Clinical Quality (65 pts ratings compared to specialty average for fifteen clinical indicators: mammograms, paps, asthma, diabetes, chf, flu shots ) –Generic prescribing 30 points –Access (Non traditional office hours, QI activity, EMRs, E- prescribing—5 points each Sliding scale of rewards –65-89 points $3 per E and M Service – points $6 per E and M Service –>100 points $9 per E and M Service

Example #3: PacifiCare Launched in July, 2003 Initially, rewards for performance on 5 clinical measures (eg pap smears, mammograms, Hb A1C testing) and 5 measures of service quality Targets set at 75 th percentile of performance from the previous year Bonus payment of $0.23 per member per month for each target met or exceeded—up to 10 payments

Example #4: PacifiCare-2006 Targets –14 clinical measures (eg pap smears, mammograms, Hb A1C testing) 62.5%; –5 measures of service quality 26%; –Information Technology (EMR, Dec support) 12.5% Sliding scale rewards set at 80 th and 90 th percentile of performance from the previous year

Example 5: British National Health Service Starting April, 2004 – The NHS provided higher pay to all family practitioners for quality of care 146 indicators –Clinical Indicators for 10 conditions (e.g. HTN, CAD, DM) –Organizational indicators (e.g patient records, education and training) –Patient Experience—responding to patient surveys Performance data provided by FPs with Audits Payments averaged $40,000 per FTE FP in the first year

National Survey of 242 Health Plans on P4P 52% representing 81% of enrollees had programs to pay for performance –90% had P4P for physicians –38% had P4P for hospitals Source: Rosenthal et al. N Engl J Med. 2006

How are Physician Pay for Performance Plans Structured? Domains Included% Clinical Quality80% Satisfaction68% Inf. Technology Costs 68% 18% Average Bonus% < 5%35% ≥ 5%30% Not sure35% Source: Rosenthal et al. N Engl J Med, 2006 Rewards for reaching fixed threshold most common (62%); Only 20% reward improvement

Federal Interest in Pay for Performance is Growing  Deficit Reduction Act 2006 established the building blocks  Mandates HHS to develop a plan for CMS to initiate P4P for hospitals by 2009  Provides financial incentive of 2% for hospitals to report quality measures to CMS  Medicare Improvements for Patients and Providers Act (MIPPA-2008) extends requirements for P4P to physicians and other professional services  Requires HHS to develop a plan for CMS to extend P4P to physicians with suggestions for legislation by May, 2010

Paying for Quality May Seem like Motherhood and Apple Pie But it is Not Will it work? What are the Challenges and potential Pitfalls? What developments are we likely to see going forward?

The Empirical Evidence on Paying for Performance is Minimal Petersen et al reviewed 17 studies between –Overall findings are mixed few strongly positive results –4 studies showed unintended effects such as adverse selection and improved documentation rather than delivery of care Data are lacking: P4P can work; P4P may fail Source:Petersen et al Ann Intern Med, 2006

PacifiCare Program on Pay for Performance in California Launched in July, 2003 Rewards for performance on 5 clinical measures (e.g. pap smears, mammograms, Hb A1C testing) and 5 measures of service quality Targets set at 75 th percentile of performance from the previous year Bonus payment of $0.23 per member per month for each target met or exceeded—up to 10 payments

Improvement in Performance: CA (intervention) vs Pacific NW (control) Pre-QIPPost-QIPPost-Pre Pap Smears California39.2%44.5%5.3% Pacific Northwest55.4%57.1%1.7% Column Difference (CA-NW)16.2%12.6%3.6% * Mammography California66.1%68.0%1.9% Pacific Northwest72.4%72.6%0.2% Column Difference (CA-NW)6.3%4.6%1.7% Hb A/C Testing California62.0%64.1%2.1% Pacific Northwest80.0%82.1%2.1% Column Difference (CA-NW)18.0% 0.0%

Improvement After the QIP and Payments by PacifiCare to California Groups with High, Middle, and Low Baseline Performance for Mammography Baseline Performance PacifiCare Enrollment Pre-QIP Rate Post- QIP Rate Improve- ment Bonus High (> 75 th percentile) 557,00072%73%1%$383,370 Middle (within 10 % of target) 385,00065%67%2%$88,787 Low (more than 10% below target) 244,00053%59%6%$987

CMS Premier Hospital Incentive Demonstration Voluntary program launched in Q4, 2003, 266 hospitals Rewards for performance on 33 indicators (Pneumonia, CHF, AMI, CABG, TKR, THR) Hospitals in top decile given 2% bonus; in second decile 1% bonus—average of $72,000 Hospitals failing in year three to exceed performance of hospitals in the lowest two deciles as established in year one, penalized 1-2%

Improvement in Composite Measures of Quality for Hospitals engaged in P4P and Public Reporting vs. Only Public Reporting Source: Lindenauer et al., N Engl J Med, 2007

Baseline Performance and Improvement in Quality Among Hospitals Engaged in P4P Pre-Period Q Post-Period Q3-2005Change Quintile 570%86%16% Quintile 478%91%13% Quintile 381%92%11% Quintile 285%92%6% Quintile 191%93%2% Source: Lindenauer et al., N Engl J Med, 2007

Five Challenges we face – and Some Strategies to Get out Ahead of the Curve.

Challenge #1 Budgetary Constraints Will Create Winners and Losers The financial incentives must be large to be effective Without new money in the system, some physicians will lose substantial funds and are unlikely to embrace the new payment systems

Challenge #2 : Adoption of Financial Incentives will be Accompanied by Wide Scale Public Reporting on Groups and Individual Doctors Previously most reporting has been at the health plan level through HEDIS and the like Reports on individual doctors will raise questions about small numbers, case mix, and attribution Reports on individual doctors and groups may be more important than the financial incentives that engender them

A – 10th Percentile C– 50th Percentile B – 25h Percentile D– 75th Percentile E– 90th Percentile Challenge #3 Getting the Payment Formula Right Distribution of Physicians’ Scores for Control of Patients’ High Blood Pressure

Challenge #4: Sutton’s Law--Going where the Money is Efficiency is a critical aspect of quality –Without cost savings we are unlikely to have enough money on the table to motivate change –We lack well accepted measures of efficiency Eighty percent of Medicare expenditures reflect practice of specialists –We need an expanded arsenal of quality metrics for specialty care

Challenge #5: Will Paying for High Quality Undermine Professionalism? Financial incentives may threaten professionalism Will patients worry when their doctors do not receive financial incentives for better quality?

Some Strategies to Move Ahead 1. Harness the power of profiling 2. Expand efforts, increase size of incentives as necessary, replicate successful models –New money will be immensely helpful 3. Directing incentives at a few indicators will not likely lead to broad improvement in quality –Rotate measures and expand the set

Moving Ahead (cont) 5. Redesign of office practice and investments in information infrastructure will be easiest to achieve in large practices –Other strategies will be particularly important to pursue in solo and small group practice settings 6. Moderate expectations. –Other efforts to foster quality—educational programs, computerized decision aids, incentives for patients— will remain important to pursue