he health
care payment system in the U.S. is undergoing a gradual transformation fostered
by the proliferation of physician and hospital pay-for-performance initiatives led
and financed by payers nationwide.
Nationally, the number of active pay-for-performance
programs has grown from just 39 in 2003 to nearly 150 today, according to the Washington-based
Leapfrog Group, which tracks the programs’ progress.
Payers—including insurers, employers and even the federal
government—see pay for performance as a potential solution to today’s health care
crisis, which many believe was created by an unfettered fee-for-service payment
system that rewards quantity rather than quality.
And although pay for performance does require an initial
investment by program sponsors, the programs so far are yielding both savings in
health care costs and improvements in patient outcomes, the programs report. "Pay
for performance compensates for deficiencies in the payment system," says Francois
de Brantes, CEO of Newtown, Connecticut-based Bridges to Excellence, an employer-led
pay-for-performance program founded five years ago.
"We have to fundamentally change the incentives in the
system because they do not reward the right things," says Andrew Webber, president
and CEO of the National Business Coalition on Health, a consortium of employer coalitions
based in Washington. "The system is so focused on paying for downstream acute-care
illness that we don’t pay for prevention, for disease management, for wellness."
Although the idea of paying health care providers based
on performance has been around for decades—some say it resembles capitation payment
arrangements—it was not until recently that it gained enough momentum to be considered
a change agent.
In fact, Prometheus Payment Inc., a Washington-based
nonprofit corporation, developed a payment model created by a group of experts in
health care economics and policy, law, health plan operations and performance measurement
that is essentially a product of the current pay-for-performance movement, says
de Brantes, who was a member of the design team. Its goal is to pay providers based
on what it costs to deliver only the care that science has proved to be appropriate
for specified conditions, he says. Minneapolis and Rockford, Illinois, have been
chosen as test sites for the program, which is scheduled to begin in January 2009.
And Bridges to Excellence’s success in Minnesota made
it the model for the health care payment reform legislation the state enacted this
year.
Pay for performance "is creating a demand for more fundamental
payment reform because the amounts tied to results are still small, and providers
are recognizing that they need a different way of being paid if results are going
to matter most," de Brantes says.
|
Leading Pay-for-Performance
Programs |
| Sponsor |
Participants |
Date Started |
Incentives paid |
| CMS/Medicare |
Physicians |
2008 |
$1.35 billion* |
| Integrated Healthcare Assn. |
Physician Groups |
2003 |
$210 million |
| Horizon BCBS of New Jersey |
Hospitals |
2006 |
$12.2 million |
| Bridges to Excellence |
Physicians |
2003 |
$12 million |
*Budgeted but not yet
paid
Source: BI |
Indeed, "the days of making payments without a link
to some measure of results are gone," says Steve Raetzman, senior health care consultant
at Watson Wyatt Worldwide in Arlington, Virginia.
Pay-for-performance programs also provide the framework
necessary to promote health care consumerism, he says.
"If you’re going to have transparency for consumers
to make informed decisions, they need the same information that’s being used to
gauge pay for performance," Raetzman says. "It’s the next obligation that payers
and providers have to consumers."
Although pay for performance might be a panacea for
what ails America’s health care system, it does have its critics, foremost of which
are the potential beneficiaries of its rewards: providers.
"The goal has to be quality; it can’t be all about costs,"
says Dr. Nancy Nielson, president of the Chicago-based American Medical Association.
Among other things, she says, pay for performance should
take into account potential barriers to physician performance such as patient noncompliance,
and that incentive payments should always be new money coming into the health care
system, not just a redistribution of payments already being made.
But the proponents of pay-for-performance programs insist
that the incentive payments are, in fact, on top of the fees already being paid
to providers.
"This is out of our pocket," says Bill Finck, director
of network initiatives at Horizon Blue Cross Blue Shield of New Jersey, which launched
a pay-for-performance program involving hospitals in 2006. "This is additional dollars
for the hospital. It is not related to their reimbursement. It’s recognition of
the quality of care they provide and the patient safety measures they adhere to."
However, the source of funding is intangible, Finck
says, since it is derived from anticipated reductions in future medical costs as
a result of better patient outcomes.
The program, which uses criteria established by the
Leapfrog Group, so far has paid a total of $12.2 million in incentives to more than
60 hospitals operating in New Jersey.
Another criticism often leveled against pay for performance
is the fact that the initiatives are mostly regional, and therefore aren’t on a
large enough scale to affect the health care payment system nationally.
But all that could change with this year’s launch of
a nationwide pay-for-performance program by the Centers for Medicare and Medicaid
Services. Authorized to create the initiative as part of the 2006 Tax Relief and
Health Care Act, the centers have set aside $1.35 billion to pay incentives to physicians
who treat Medicare patients.
"When CMS does something, that generally changes the
marketplace," says Dr. Michael Cryer, senior medical officer at Hewitt Associates
in Woodlands, Texas.
But even without a push from the federal government,
the employers and insurers whose initiatives encompass only a few thousand to several
hundred thousand people in communities across the country are having an impact,
says Leapfrog Group CEO Leah Binder.
"They’re having more of an influence on payment reform
than we anticipated," she says. The idea of pay for performance "has been such a
powerful notion in the health care system that we see resonance all over the place,"
including the Centers for Medicare and Medicaid Services, she says.
"But it isn’t the dollars that’s creating the impact," Binder
says. "It’s the common-sense truth behind the [pay-for-performance] … movement:
that we ought to pay for the best, and we should pay less when it’s not the best.
These are fundamental concepts of business, so it’s no wonder it’s the business
community that’s driving this."
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