Pay-for-performance..

Can it deliver?

Dale W. Bratzler, DO, MPH

QIOSC Medical Director

What’s driving policy on health

care?

US Healthcare SpendingProblem #1 - Cost!

• $1.9 trillion• 16% of the gross domestic product• $6,280 for each man, woman, and

child

• Medicare and Medicaid - $600 billion in 2006

US Healthcare Spending

• Five percent of the population accounts for almost half of total healthcare expenses

• The 15 most expensive health conditions account for 44 percent of total healthcare care expenses

• Patients with multiple chronic conditions cost up to seven times as much as patients with only one chronic condition

Stanton MW, Rutherford MK. The high concentration of U.S. health care expenditures. Rockville (MD): Agency for Healthcare Research and Quality; 2005. Research in Action Issue 19. AHRQ Pub. No. 06-0060.

Spending is Unevenly Distributed

22

49

64

80

97

3

0

20

40

60

80

100

Top 1% Top 5% Top 10% Top 20% Top 50% Bottom 50%

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Spending is Unevenly Distributed

Percent of Population

Expenses per person

$

Top 1% > 35,543

Top 5% > 11,487

Top 10% > 6,444

Top 20% > 3,219

Top 50% 664

Bottom 50% < 664Conwell LJ, Cohen JW. Statistical Brief #73. March 2005. Agency for Healthcare Research and Quality, Rockville, MD.

Spending is Unevenly DistributedAge Distribution of the Top 5%

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9 10

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29

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18 andunder

19-34 35-44 45-54 55-64 65-79 80 andover

Age in years

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Problem #2 = Variation

Dartmouth Atlas of Healthcare

Wennberg/Fisher et al.

• Evidence-sensitive care• The easiest one to attack

• Patient preference-sensitive care• We are beginning to (finally) scratch the

surface• Supply-sensitive care

• Nobody has any idea what to do about this, short of legislative mandates and/or rationing

Elyria has three times the rate of angioplasties of Cleveland, 30 miles away

www.dartmouthatlas.com

Care of Patients with Chronic Illness

New Study Shows Need for a Major Overhaul of How United StatesManages Chronic Illness

“Almost One-Third of Medicare Spending for Chronically Ill Unnecessary. Improving Care Could

Also Lower Costs”

Care of Patients with Chronic Illness

"Variation is the result of an unmanaged supply of resources, limited evidence about what kind of care really contributes to the health and longevity of the chronically ill, and falsely optimistic assumptions about the benefits of more aggressive treatment of people who are severely ill with medical conditions that must be managed but can't be cured."

Problem #3 - Performance

Patients’ care often deficient, study says. Proper treatment given half the time. On average, doctors provide appropriate health care only half thetime, a landmark study of adults in 12 U.S. metropolitan areas suggests.Medical Care Often Not Optimal Failure to Treat Patients Fully Spans Range of What Is Expected of Physicians and Nurses

Study: U.S.Doctors are not following the guidelines for ordinary illnesses

.

The American healthcare system,often touted as a cutting-edge leader in the world, suddenlyfinds itself mired in serious questions about the ability of itshospitals and doctors to deliverquality care to millions.

Medical errors corrodequality of healthcare system

RAND Study: Quality of Health Care Often Not

Optimal

In summary, we found that the quality of hospital care in the United States varies

widely across different indicators of quality and that individual hospitals vary in their performance according to indicators and

conditions.

N Engl J Med 2005;353:265-274.

Quality from the Patient’s Perspective

Hospital Quality Measures, Qtr. 4, 2005

60.2

83.2

57.6

39.7

58.6

0

20

40

60

80

100

HF AMI SCIP Inf Pneumonia 23 Measures

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The “Appropriate Care Measure” reflects the percentage of hospital patients that receive all indicated care (all-or-none).

Unsustainable cost growth(questionable returns in healthy lifespan)

+ Huge variation in services delivered

(no relationship to outcomes)

+

Data demonstrating significant gaps in delivery of ideal care

=

Need to Pay Differently

Calls for Medicare to Provide Payment for Quality

• IOM report 2002, 2006• Health Affairs article, former

HCFA administrators, 2003• MedPAC report 2004• Private sector efforts

• Bridges to Excellence• Leapfrog Group

Presentation Outline

• Pay-for-performance… does it work to improve quality?

• Payment incentive models

• The potential for unintended consequences

Does Pay-for-performance improve quality?

• Strategies for accelerating quality improvement:• Public reporting• Pay-for-performance

Despite limited evidence demonstrating benefit, P4R and P4P are being widely advocated

Hospital Public Reporting

434

1407

1952

4043 4192

August, 2003 February,2004

May, 2004 October, 2004 March, 2005

Number of Reporting Hospitals

0.4% payment incentive

Hospital Public Reporting

• Currently have a very limited set of measures• Focus predominantly on processes of

care• Few outcomes measures because of

risk-adjustment challenges

Hospital Public Reporting

• Hospital Quality Alliance• 10 measures recently expanded to 21 (AMI,

HF, Pneumonia, SIP)

• New York State CABG mortality• Wisconsin “Quality Counts”

• Generally, quality seems to improve• Mechanism??

• Little data that reporting drives much patient decision making at this point

• Hospital market share largely unaffected

Pay-for-PerformanceMuch to be learned

• While there are lots of demonstrations, there is little evaluative data at this time

Ann Intern Med. 2006;145:265-272.

Does P4P improve the quality of health care?

• Seventeen studies with control groups• 13 focused on process of care measures

• 5 of 6 studies of physician-level financial incentives linked to improved quality

• 7 of 9 studies of provider group-level incentives found partial or positive effects on quality

• 4 studies suggested unintended consequences of payment incentives

Petersen LA, et al. Ann Intern Med. 2006;145:265-272.

HQID Hospital Participation

• Voluntary• Eligibility: Hospitals in Premier Perspective

system as of March 31, 2003 • 278 hospitals started• Demonstration Project: Pilot test of concept

• Can economic incentives effectively improve quality of care?

1st Decile

Hospital

Hospital

Year One Year Two Year Three

Top Performance Threshold

Payment Adjustment Threshold

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Condition XCondition X

Condition X

Results show significant improvement

Composite Quality Score: Quarterly Median Improvement by Focus AreaCMS/Premier Hospital Quality Initiative Demonstration Project Participants

October 1, 2003 - December 31, 2004Preliminary Results

50%

55%

60%

65%

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75%

80%

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95%

100%

AMI CABG Pneumonia Heart Falure Hip and Knee

Clinical Focus Area

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Q4-03 Q1-04 Q2-04 Q3-04 Q4-04

CMS/Premier HQI ProjectReduction in Variation

AMI Composite Quallity Score Distribution

Time Periods:4Q03 - 2Q04

2Q041Q044Q03

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• Positive trend in both upper and lower scores of range

• Reduction in variance (narrowing of range)

• Median moving upward

Does P4P reward improvement?

Those that improved the most, received the lowest bonus payments. Those at high levels of performance to start with reaped most of the rewards.

Rosenthal MB, et al. JAMA. 2005;294:1788-1793.

1st Decile

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Hospital

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Condition X

The “winners”

Cost savings?

• To date, there is little evidence that pay-for-performance programs save money• Many target measures that address

underutilization of care and services• Most do not provide incentives for

efficiency

Little coordination

• At this time, there has been little coordination between payers• Multiple different models and

measures even within the same clinical setting

Payment Incentives

Financial Rewards/Incentives

• Bonus Payments

• Awards for Improvement Projects

• Fee Schedules Based on Performance

• “At-Risk” Contracting

• Cost Differentials for Consumers

P4P Issues

• What to Reward• Relative quality• Absolute threshold• Improvement

• How to Finance Incentives• Across-the-board reduction to create pool• Offsetting penalties• Offsetting savings• New dollars: ? Source

P4P Issues

• Who to reward?• Individual practitioners• Groups of practitioners• Communities (?!)

Challenges and Pitfalls to P4P

The potential for unintended consequences….

Challenges to Incentives for Quality Performance

• Selection of measures/off label use of measures

• Dynamic measurement environment• Measures maintenance• Hospital Burden • Time lags• Validation/Scoring methodology• Need for proof of effectiveness• Unintended consequences

Issues in the Selection of Quality Measures

• Outcome measures (i.e. mortality) require risk adjustment

• Disease-specific measures don’t necessarily reflect overall quality

• Volume may or not be a proxy for quality

• Statistical issues with low volume programs

• Hospital performance versus medical staff performance

Unintended Consequences

• Direct harm

• Indirect harm

Pneumonia as an example…Direct Harm

• Antibiotics within 4 hours of hospital arrival• Process linked to improved patient

outcomes, however• Some patients who are ultimately diagnosed

with pneumonia do not have an obvious diagnosis at the time of arrival

• Potential for inappropriate antibiotic administration to those who don’t have pneumonia to achieve high performance rates on the measure

Unintended ConsequencesDirect Harm

• Giving a beta blocker to a patient with contraindications

• Use of VTE prophylaxis in patients with bleeding risks

• Clinical issues of uncertainty that are exacerbated by incentives created by pay-for-performance

Unintended ConsequencesIndirect Harm

• Caregivers shift attention to those conditions that are subject to payment incentives• e.g., triage pneumonia patients in preference to

abdominal pain patients• Focus on glucose control in a diabetic while

ignoring control of hyperlipidemia• Reallocating resources to excel on measures with

payment incentives• Risk avoidance – turn away high risk patients• Performance in one area does not necessarily

predict performance in another

“playing to the test”

What do we know about P4P?

• Currently resource intensive (data collection, validation, etc)

• A number of issues to be resolved with regard to incentive structure

• Programs are proliferating• The evidence on effectiveness is mixed• Expansion is inevitable• Need to build evaluation into P4P

programs prospectively

What do we know about P4P?

• Hospitals• Dislike relative thresholds (prefer absolute

thresholds)• ? Support for payment based on

improvement• Don’t currently include hospital outpatient

services• How to calculate ROI• Don’t track unintended consequences• Don’t currently align with physician

incentives

Current CMS P4P Demonstrations

• Premier HQID

• Physician Group Practice Demonstration• Medicare Care Management Performance

Demonstration• Medicare Health Care Quality Demonstration• Chronic Care Improvement Program• ESRD Disease Management Demonstration• Disease Management Demonstration for Severely

Chronically Ill Medicare Beneficiaries• Disease Management Demonstration for Chronically

Ill Dual Eligible Beneficiaries • Care Management For High Cost Beneficiaries 

PVRP

• On October 28, 2005, CMS announced the Physician Voluntary Reporting Program (PVRP) to begin on January 3, 2006. The primary purpose of the PVRP is to provide a means for physicians to report clinical data using the claim process. This clinical and other claims data can be used to calculate quality measures. Physicians who participate will receive confidential feedback, if requested, on their reporting and performance rates.

The future

• More transparency• More partnerships and coalitions• More measures

• Efficiency measures• Efficiency across providers – Current

demonstration projects• Mortality measures

• More P4P