Pay-for-Performance: A Decision Guide for Purchasers Guide Prepared for: Agency for HealthCare Research and Quality U.S. Department of Health and Human Services Prepared by: R. Adams Dudley, M.D., M.B.A. University of California San Francisco Meredith B. Rosenthal, Ph.D. Harvard School of Public Health

2 Overview Not a users manual: too little data Addresses: Developing an overall strategy Incentive design and measures selection Implementation Evaluation and revision

3 Is Our Community Ready? Do we know what we are trying to accomplish? Do we have enough influence? Are the providers ready?

4 Strategic Issues: Getting Started Voluntary vs. mandatory: Voluntary: easier, may only attract high- performing providers Mandatory (i.e., written into all contracts): creates uniform incentives, but may need high market share Bonus program is in between: “mandatory”, but providers are free to ignore it Phasing in: start with volunteers, or “pay for participation”/“pay for reporting”

5 Strategic Issues: Getting Started Which providers to target?: Hospitals and/or physicians Large vs. individual/small group Contribution of hospitals vs. physicians to quality and cost varies from region to region Measurement issues favor larger groups but incentives may be stronger for individuals System view of quality improvement suggests higher level Choose the provider target for which you can get the biggest bang for your buck

6 Increasing Inclusion of Specialists and Hospitals in Pay-for-Performance Source: Rosenthal et al., Climbing Up the Pay-for-Performance Learning Curve, Manuscript, Harvard University 2006.

7 Choosing Measures National measure sets should be considered first Tested Accepted Already being collected Some sources: AHRQ (Inpatient Quality Indicators), National Quality Forum, Hospital Quality Alliance, Ambulatory Care Quality Alliance, NCQA, Leapfrog Group

8 Incentive Design Challenges All P4P programs are not the same Design choices matter First critical question is orientation: Quality improvement across all providers, patients? Rewards for the best only? E.g., Premier Inc./CMS demonstration

9 Explicitly or Implicitly Rewarding Quality Improvement P4P programs that reward top group (e.g., 20%) or set a benchmark for reward that all must meet do not uniformly encourage improvement These features should result in more QI: Rewarding improvement explicitly (i.e. change rather than/in addition to level) Multiple levels of rewards (partial credit) Payments tied to each patient treated well

10 Case Example: Hudson Health Plan: Rewarding Quality Diabetes Management MeasureReward Blood pressure$15 for screening and $35 for BP<130/80 or $20 for <140/90 or $15 for ≥10 mmHg decrease in one and goal in the other Smoking cessation counseling$15 A1C testing and control$15 for screening and $35 for A1C<7 or $20 for A1C<9 or $15 for a 1% or more reduction LDL-C testing and control$15 for screening and $35 for LDL<100 or $20 for LDL <130 or $15 for evidence of drug tx Documentation of albuminuria; ACE/ARB treatment if positive $15 for screening and $35 for negative test, evidence of drug tx, evidence of contraindication, or nephrology consult Retinal exam$15 for exam with documentation of result Pneumococcal vaccine$10 Flu shot$10

11 Key Design Issues: How Much Money? To be effective, bonus should be commensurate with cost of effort Little good information about what it takes to reach quality targets Most P4P programs for physicians 5-10% of associated fees; hospitals 1-2%

12 Making the Business Case for Pay-for-Performance Many P4P programs target under use of beneficial but not cost-saving therapies (e.g., cancer screening) Purchasers increasingly want to orient programs toward efficiency or value – although providers may see such efforts as de-legitimizing

13 Making the Business Case for Pay-for-Performance For P4P to be cost neutral or cost saving programs have focused on: Under use of treatments that have evidence of substantial cost offsets (e.g. result in reductions in hospitalization) Over use of high-cost interventions (e.g., inappropriate surgery) Misuse/errors that result in need for more services (e.g., avoidable complications) Explicit cost or efficiency measures

14 Increasing Emphasis on Outcomes, IT, Cost-Efficiency Source: Rosenthal et al., Climbing Up the Pay-for-Performance Learning Curve, Manuscript, Harvard University 2006.

15 Planning Ahead for Evaluation You spent all that time and money…shouldn’t you assess what you accomplished? Aspects of implementation can facilitate evaluation Collecting data during a measurement (i.e. non- payment) year will allow before/after comparison Implementing P4P for some providers before others may create a natural comparison group

16 What Types of Effects to Look For Data collection should not only track intended consequences but also monitor potential side effects: Patient selection/dumping (changes in case-mix, excessive switching) Diversion of attention away from other important aspects of care Widening gaps in performance between best and worst

17 Summary Pay-for-performance can facilitate improved patient care, cost-efficiency Best practices still unknown Careful matching of goals and mechanisms will most likely lead to best results In light of uncertainties about design, evaluation is key