Rosenthal Paying for Quality Meredith Rosenthal, Ph.D. Department of Health Policy and Management Harvard University School of Public Health Boston MA October 21, 2004

Rosenthal New Programs to Reward Physicians and Hospitals Quality of care in the U.S. is poor and not improving quickly enough Quality of care in the U.S. is poor and not improving quickly enough More than 50 new pay-for-performance programs put in place this decade by health plans, purchasers More than 50 new pay-for-performance programs put in place this decade by health plans, purchasers Both physicians and hospitals to receive bonuses Both physicians and hospitals to receive bonuses Reference: Health Affairs, Vol 23, Issue 2,

Rosenthal Targeted Areas of Performance Physicians rewarded based on care in 5-10 domains of evidence-based medicine Physicians rewarded based on care in 5-10 domains of evidence-based medicine –Structure (e.g., development of Information Technology infrastructure) and process measures typical –Patient experience/satisfaction often included Hospitals rewarded on broader set of structure, process, and outcome measures (including staffing, complications, readmissions) Hospitals rewarded on broader set of structure, process, and outcome measures (including staffing, complications, readmissions)

Rosenthal Quality Improvement Quality improvement almost never targeted explicitly Quality improvement almost never targeted explicitly Programs reward top performers (e.g., top 20% in market) or all providers reaching a fixed goal (e.g., 75% compliance with a benchmark) Programs reward top performers (e.g., top 20% in market) or all providers reaching a fixed goal (e.g., 75% compliance with a benchmark) Thus rewards pay for past achievements, may widen performance gap Thus rewards pay for past achievements, may widen performance gap

Rosenthal Strength of Incentives Typical payments for best performers set to roughly 5% of revenues from the sponsoring plan or purchaser Typical payments for best performers set to roughly 5% of revenues from the sponsoring plan or purchaser Incentive sponsors usually represent minority share of provider revenues Incentive sponsors usually represent minority share of provider revenues Will this be enough to spur necessary changes? Will this be enough to spur necessary changes?

Rosenthal Concluding Thoughts Pay-for-performance targeting broad set of domains has been widely adopted Pay-for-performance targeting broad set of domains has been widely adopted Current programs may not be well positioned to result in dramatic quality improvements Current programs may not be well positioned to result in dramatic quality improvements –No rewards for improvement –Relatively small dollar amounts