1. California Pay for Performance: Understanding the Impact of Provider Incentives for Quality Tom Williams Executive Director Integrated Healthcare Association AHRQ Annual Conference September 9, 2008

2. IHA Sponsored Pay for Performance (P4P) Program The goal: To create a compelling set of incentives that will drive breakthrough improvements in clinical quality and the patient experience through: √ Common set of measures √ A public scorecard √ Health plan payments 2

3. Plans and Physician Groups – Who’s Playing? Health Plans: Aetna Blue Cross Blue Shield Western Health Advantage Medical Group and IPAs: 230 groups 35,000 physicians * Kaiser participates in the public reporting only 12 million HMO commercial enrollees CIGNA Health Net of CA Kaiser* PacifiCare/United 3

4. Measurement Year Domain Weighting Domain2003-6200720082009 Clinical40-50%50%40% Patient Experience30-40%30%25%20% IT Adoption10-20%X X X IT SystemnessX20%15%20% Coordinated Diabetes Care XX20% Appropriate Resources Use XXXGain- sharing 4

5. Public Reporting 5

6. Health Plan Payments Each health plan determines their own reward methodology and payment amount Most plans pay on relative performance, after meeting thresholds − $38 M paid out in 2004 − $54 M paid out in 2005 − $55 M paid out in 2006 − $65 M paid out in 2007 (about 1.5 to 2% of base pay on average) Total paid from 2004 through 2007 (for prior measurement year) is over $ 210 million 6

7. Physician Group Engagement Program Strengths - Physician groups are highly engaged, 74% believe the measures are reasonable, widespread support for increased incentives, and belief the program has increased the focus on quality improvement and IT capabilities. Program Weaknesses - Lack of consumer interest in public reporting and concern about the potential for too many measures. Overall Rating - 65% rated the program as a “4” or “5” (on a 1 to 5 scale) for importance with a mean score of 3.86. Source: Program Evaluation by RAND/UC Berkeley

8. Health Plan Engagement Program Strengths - Increased collaboration, push toward QI, investments in IT, and greater accountability and transparency. Program Weaknesses - Improvements viewed as marginal, concerns about “teaching to the test”, lack of a positive ROI, and failure of clinical data fed to raise plan HEDIS scores. Overall Rating - 2.5 mean score (1 to 5 pt. scale) Source: Program Evaluation by RAND/UC Berkeley

9. 9 Lessons Learned #1: Measures Lesson Clinical improvement has been incremental Evidence points to “teaching to the test” vs. systemic improvements P4P Response Created Coordinated Diabetes Care Domain to focus attention on redesign needed to drive breakthrough improvement Considering use of multiple chronic care measure domains integrated with care process measures to drive systemic change

10. 10 Summary of Performance Results Clinical: continued modest improvement on most measures − 5.1 to 12.4 percentage point increases since inception of measure Patient experience: scores remain stable but show no significant system wide improvement IT-Enabled Systemness: most IT measures are improving − Almost two-thirds of physician groups demonstrated some IT capability − Almost one-third of physician groups demonstrated robust care management processes Continued performance improvements but “breakthrough” point not achieved yet.

11. 11 Clinical Results Baseline – MY 2007 California P4P Program

12. California P4P HEDIS Scores Surpass National Average The national average outperformed the California plans in the baseline year 2002 The California plans rate of improvement over the baseline year has increasingly exceeded the rate of improvement of the national average In MY 2006, the California plans outperformed the national average performance Includes commercial plans and excludes Kaiser (Not fully in P4P until 05) ( NCQA Study, 2007) 12

13. 13 IT Measure 1: Population Management Activities California P4P Program

14. 14 IT Measure 2: Point-of-Care Activities Percentage of Groups California P4P Program

15. 15 Lesson Wide variation across regions exists; contributes to overall “mediocre” statewide performance Big gains possible with focused attention on certain regions P4P Response Pay for and recognize improvement (20% of payment for 2007) More fundamental change in calculus of payment for improvement for 2008/09 using CMS approach Lessons Learned #2: Regional Variability

16. 16 Health Disparities and California P4P: Clinical Performance Variation MY 2006 Results by Region Top Performing Groups

17. P4P Performance Score Clinical Performance Health Disparities and California P4P: A Tale of Two Regions

18. Inland Empire Bay Area PCPs/100K Pop. 53116 % Pop. Medi-Cal17% 12% % Hispanic43% 21% Per Capita Income $ 21,733 $ 39,048

19. P4P Performance Score Clinical Performance Health Disparities and California P4P: A Tale of Two Regions

20. Are Quality Disparities Correlated with Physician Reimbursement Disparities? The data and subjective experience suggest: Physicians groups, located only in geographies with low socioeconomics, receive disproportionately lower reimbursement across their practice, resulting in diminished physician and organizational capacity, reducing both access and quality of healthcare, even in a uniformly, well-insured population.

21. P4P Payment Incentives Fundamental reimbursement disparities appear to be the main culprit; however P4P should at a minimum not increase reimbursement disparities Payment for absolute and relative performance should be balanced with payment for improvement

22. Paying for Improvement Survey Response: What % of total bonus payments by health plans should be allocated to improvement vs. relative performance? (n=200, IHA Stakeholders meeting, 10/4/07)

23. Paying for Performance & Improvement Excerpt from CMS Hospital Value-Based Purchasing Listening Session #2, April 12, 2007

24. 24 Lesson Learned #3: Incentives Lesson Incentives may not be properly targeted or structured to achieve desired outcomes Amount of pay must keep pace with number of measures P4P Response Increased attention to “pay” − Resolved antitrust concerns; formed Payment Committee − Reduce payment variability through methodology recommendations, including minimum payment − Eliminate “black box” by advanced notice of payment methodology

25. 25 Lesson Learned #4: Affordability Lesson Diminishing affordability of coverage demands greater attention to cost Health plan commitment is wavering in the absence of a clear ROI P4P Response Implement cost efficiency and appropriate resource use measures and gain sharing incentives. Develop business case and ROI − develop method to measure ROI − move HEDIS scores to higher levels of performance versus nation

26. 26 Cost Efficiency Measurement Episodes of care testing Resource use measure development and implementation (e.g., readmission w/in 30 days) Hospital P4P under consideration Incentives based upon gain sharing

27. 27 California Pay for Performance For more information: www.iha.org (510) 208-1740 Pay for Performance has been supported by major grants from the California Health Care Foundation