Pay for Performance in the U.S. - An Update

• Abstract
• Characteristics of this policy
• Purpose and process analysis
• Expected outcome
• References

Featured in half-yearly report: G-politik in Industrieländern 11

Abstract

Pay for Performance (P4P) programs which give providers a financial incentive to improve quality have widespread appeal, yet initial evaluations show little evidence of quality improvement. Nonetheless, these programs represent a first step towards reforming the current payment system. The Medicare program has recently expanded its P4P initiatives and has the potential to provide this movement with central leadership and direction.

Neue Entwicklungen

The quality of care is a key concern in the United States. Each year, thousands of medical errors and preventable deaths are documented (IOM 1999, IOM 2001). Only half of adults receive recommended evidence-based care for prevention, and acute and chronic conditions (McGlynn, 2003). Wide variation exists in clinical care by geographic region (Wennberg JE, 2002). Provider payment mechanisms in the United States offer little incentive to improve the quality of care delivered. One recommendation by the Institute of Medicine - "to align payment incentives with quality" - has become the basis for pay for performance (P4P) programs (IOM, 2001). These initiatives provide a financial reward to providers who meet a certain standard of quality (see also previous HPM report on this issue "Medicare "Pay-for-Performance" Initiatives"). 

Results of early P4P programs

In 2004, Rosenthal and colleagues conducted an extensive survey of pay for performance programs in the United States initiated between 1998-2003 (Rosenthal et al, 2004). The largest of these programs- the Leapfrog Group, Bridges to Excellence, and the Centers for Medicare and Medicaid Services-Premier Inc's Hospital Quality Incentive demonstration program have been described in a previous report (Huynh PT, 2004). In 2007, they again contacted these early adopters to characterize the progress of their P4P programs and evaluate their results: 

• Competitive and non-competitive bonus programs are most commonly used to reward providers. Competitive programs compare the performance of providers to their peer group (relative), whereas non-competitive programs reward all providers who attain a specified standard of care (absolute). In 2003, no program explicitly rewarded providers for quality improvement. In 2007, one-quarter had begun to reward improvement in addition to the relative or absolute attainment of quality standards. Although the size of the financial reward has increased among some programs, as well as the total pool of money allocated to P4P initiatives, bonuses may still not be large enough to engage providers in these programs and significantly impact their revenue stream (Rosenthal, 2004 and 2007).
• Early P4P programs mainly included process of care measures (e.g., vaccination rates) from organizations such as the National Committee on Quality Assurance. In 2007, programs had expanded their measurement sets to include health outcomes, cost efficiency, patient satisfaction, and information technology. In addition, while programs mainly targeted primary care physicians, there has been an increased effort to measure the care delivered by specialists. However, the lack of nationally recognized measures to assess specialty care was cited as a continuing barrier to including specialists in P4P programs (Rosenthal, 2004 and 2007). Most programs target group practices rather than individual physicians. While holding individual physicians responsible for the quality of care is important, many believe that quality problems are better addressed at the system-level (Rosenthal et al, 2005).

P4P have had widespread appeal; today nearly 60 percent of commercial HMOs have a P4P program (Rosenthal, 2006). Yet, there have been few formal evaluations of these programs and there is little evidence to suggest that these programs improve the quality of care (Rosenthal, 2005, 2006, and 2007). Only 7 percent of the programs surveyed had been formally evaluated. Overall, 38 percent of respondents reported improvement in quality, 42 percent found mixed effects, and 20 percent found no effect (Rosenthal, 2007). A separate evaluation of the CMS-Premier Hospital Quality Incentive program showed improvement in average quality scores for all five clinical areas (AMI, CABG, heart failure, pneumonia, and hip and knee failure); however, the majority of bonus payments went to the top performing hospitals (USDHHS, 2007; Lindenauer, 2007). Many are looking to the Medicare program to assume a leadership role since its market share gives it the greatest leverage, and commercial providers are likely to follow their lead.

Innovationsgrad	traditionell		innovativ
Kontroversität	unumstritten		kontrovers
Strukturelle Wirkung	marginal		fundamental
Medienpräsenz	sehr gering		sehr hoch
Übertragbarkeit	sehr systemabhängig		systemneutral
current    previous

The first generation of P4P programs have not achieved their intended effects, yet they represent a much needed step in reforming the payment system. Further evaluation of current programs is needed if P4P initiatives are to be redesigned to achieve their objectives. Central leadership is also needed to standardize quality indicators and financial incentives; this role can potentially be assumed by Medicare.

Purpose and process analysis

Current Process Stages

	Idee	Pilotprojekt	Strategiepapier	Gesetzgebung	Umsetzung	Evaluation	Veränderung/Richtungswechsel
Implemented in this survey?

Initiators of idea/main actors

• Regierung: The Federal government is very supportive of P4P programs. Recent legislation directs the Centers for Medicare and Medicaid Services to include P4P strategies in its contracts in the future.

• Leistungserbringer: Provider support is mixed. Common complaints include increased administrative burden to comply with quality reporting, and the use of claims data to assess clinical performance. Additionally, the financial reward may not be enough to engage providers.

• Kostenträger: P4P programs are widely implemented by health plans. However, their ability to influence providers may depend on the leverage of physicians/hospitals within a community, and the nature of their previous contracting relationship which has been contentious.

• Patienten, Verbraucher: Consumers have generally made little use of publicly-reported quality information. Since P4P programs target providers, consumers may be unware of these initiatives, but can indirectly benefit from quality improvement.

Stakeholder positions

Health plans, large employer coalitions, and the Federal government have led the development and implementation of P4P programs. Over the past two decades, health care costs have increased at double-digit rates. These stakeholders have assumed an increasingly large share of the costs, but have not seen a corresponding improvement in quality. Payment mechanisms have traditionally not provided incentives to improve quality; payments to providers are generally the same irrespective of the quality of care delivered (Rosenthal, 2004). P4P programs use financial incentives to encourage improvements in quality and have become widespread over the last few years. Despite the lack of evidence that P4P programs improve quality, these programs are widely implemented in the private sector and the Medicare program has also recently expanded its P4P initatives. 

Provider support for these programs continues to be mixed and varies among local markets. For example, the Integrated Healthcare Association's program in California is one of the largest collaborations between health plans, providers, and employers. However, California has a strong history of collaboration and innovation in health care which does not exist in many areas of the country. Plans and purchasers may find it difficult to implement P4P programs in communites where large physician organizations and hospital systems are resistant to these initiatives and have greater leverage (Trude, 2006).  

Actors and positions

Regierung
Federal government	sehr unterstützend		stark dagegen
Leistungserbringer
Physicians	sehr unterstützend		stark dagegen
Kostenträger
Health plans	sehr unterstützend		stark dagegen
Patienten, Verbraucher
Patients/Consumers	sehr unterstützend		stark dagegen
current    previous

Influences in policy making and legislation

The 2003 Medicare Modernization Act established the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program which requires that  all hospitals paid by the Prospective Payment System submit quality data or receive a 0.4% lower Annual Payment Update between 2005-2007 (USDHHS, 2007). The Deficit Reduction Act of 2005 (DRA) increased the incentive to report quality data - in 2008, hospitals will face a 2% reduction in their annual payment update (USDHHS, 2007 and DRA, 2005). Additionally, the DRA stipulates that beginning in October 2008, Medicare will not reimburse hospitals for avoidable complications if acquired during a hospital stay (DHHS, 2007). An analysis of five adverse events showed that Medicare spends approximately $300 million per year in extra payments for these events (Zhan C, 2006).   

The DRA also required the Centers for Medicare and Medicaid Services to submit a hospital value-based purchasing plan to Congress in 2007, which will take effect in 2009. Part of its proposal builds upon the RHQDAPU program, and proposes to provide financial incentives to hospitals based on the quality data that are currently reported. It will also expand the quality information available to beneficiaries through the Hospital Compare website (DHHS, 2007).

Legislative outcome

Enactment

Actors and influence

Regierung
Federal government	sehr groß		kein
Leistungserbringer
Physicians	sehr groß		kein
Kostenträger
Health plans	sehr groß		kein
Patienten, Verbraucher
Patients/Consumers	sehr groß		kein
current    previous

Positions and Influences at a glance

Adoption and implementation

N/A

Monitoring and evaluation

N/A

Expected outcome

P4P initiatives have thus far not achieved the improvement in quality that was anticipated over five years ago. Several lessons have emerged from first-generation programs.

• First, most programs reward providers based on absolute or relative performance. Those providers already above the threshold can receive bonuses by continuing their current practices. Low performers have no incentive to improve if they lack the resources to move above the threshold (Rosenthal, 2007). Relative performance can promote competition among physicians and provider groups, but does not encourage shared learning about which programs work best. Rewarding improvement, which is becoming more common, is not without its drawbacks; high performers are not likely to show large enough improvements to receive a significant bonus (Rosenthal, 2006).
• Second, the size of bonuses vary greatly and may not significantly affect providers' income. In addition, since most providers contract with multiple payors, they may have only a few patients from any one plan; this not only discourages providers from engaging in a plan's P4P program, but makes the financial bonus for these patients insignificant (Trude, 2006).
• A third and related issue is that plans and purchasers use a variety of quality indicators. Providers often have to comply with multiple sets of measurements and incentives. This increases their administrative burden, and providers have reported receiving contradictory scores from different plans for the same condition (Trude, 2006, Mehrotra 2007).

Despite these design and implementation issues, plans and purchasers continue to be supportive of P4P programs. These programs represent the first step towards reforming the payment system, which is not currently designed to support quality improvement. Many anticipate that Medicare's recent leadership role is a step towards resolving some of the problems associated with first generation P4P programs.

Impact of this policy

Qualität	kaum Einfluss		starker Einfluss
Gerechtigkeit	System weniger gerecht		System gerechter
Kosteneffizienz	sehr gering		sehr hoch
current    previous

With some exceptions, pay for performance programs have not resulted in signficant quality improvement or demonstrated a return on investment.

References

Sources of Information

• Deficit Reduction Act of 2005. S. 1932 Section 5001 Public Law No. 109-171.
• Institute of Medicine. To Err is Human: Building a Safer Healthcare System. Washington D.C.: National Academy Press, 2000.
• Institute of Medicine. Crossing the Quality Chasm: A New Health System for the 21st Century. Washington D.C.: National Academy Press, 2001.
• Lindenauer PK, Remus D, Roman S et al. Public Reporting and Pay for Performance in Hospital Quality Improvement. New England Journal of Medicine (356) 5: 486-496, February 2007.
• McGlynn EA, Asch SM, Adams J et al. The Quality of Health Care Delivered to Adults in the United States. New England Journal of Medicine (348) 26:2635-45, 2003 June.
• Mehrotra A, Pearson SD, Coltin KL et al. The Response of Physican Groups to P4P Incentives. The American Journal of Managed Care (13) 5: 249-255, May 2007.
• Rosenthal M, Fernadopulle R, Song HR and Landon B. Paying For Quality: Providers' Incentives For Quality Improvement. Health Affairs (23) 2: 127-141, March/April 2004.
• Rosenthal MB, Frank RG, Zhonge L, and Epstein AM. Early Experience with Pay for Performance: From Concept to Practice. Journal of the American Medical Association (294) 14: 1788-1793, October 2005.
• Rosenthal MB, Landon BE, Nornam SL et al. Pay for Performance in Commercial HMOs. New England Journal of Medicine (355) 18: 1895-1902, November 2006.
• Rosenthal MB, Landon BE, Howitt K et al. Climbing up the Pay-for-Performance Learning Curve: Where Are The Early Adopters Now? Health Affairs (26) 6: 1674-1682, November/December 2007.
• Phuong Trang Huynh (reviewd by Anne-Marie Audet and Robin Osborn). Incentives for Quality. Health Policy Monitor,  June 2004. Available at www.hpm.org/survey/us/b3/1
• Trude S, Au M, and Chrisianson JB. Health Plan Pay-for-Performance Strategies. The American Journal of Managed Care (12) 9: 537-542, September 2006.
• U.S. Department of Health and Human Services. Centers for Medicare and Medicaid Services. Reporting Hospital Quality Data for Annual Payment Update. Factsheet, n.d. 
• U.S. Department of Health and Human Services. Centers for Medicare and Medicaid Services. Premier Hospital Quality Incentive Demonstration. Factsheet, September 2007.
• U.S. Department of Health and Human Services. Centers for Medicare and Medicaid Services. Report to Congress: Plan to Implement a Medicare Hospital Value Based Purchasing Program. November 21, 2007.
• Wennberg JE. Unwarranted variations in healthcare delivery: implications for academic medical centres. British Medical Journal (325) 26:961-4, October 2002.
• Zhan C, Friedman B, Mosso A, and Pronovost P. Medicare Payment For Selected Adverse Events: Building The Business Case For Investing In Patient Safety. Health Affairs (25) 5: 1386-1393, September/October 2006.

Author/s and/or contributors to this survey

Petigara, Tanaz and Gerard Anderson

Empfohlene Zitierweise für diesen Online-Artikel:

Petigara, Tanaz and Gerard Anderson. "Pay for Performance in the U.S. - An Update". Health Policy Monitor, April 2008. Available at http://www.hpm.org/survey/us/b11/2