Provider Pay for Performance: Is it Crazy to Pay More Provider Pay for Performance: Is it Crazy to Pay More? When Does it Make Sense? March 7, 2005 Arnie Milstein MD, MPH Pacific Business Group on Health Mercer Human Resource Consulting arnold.milstein@mercer.com A. Milstein  2005 g:\hcgb\mas\milstein\meetings\HIT Summit West 03-07-05 (SF).ppt

Time to Reward Clinical IT Adoption and Other Performance Leaps? g:\hcgb\mas\milstein\meetings\HIT Summit West 03-07-05 (SF).ppt

Our Urgent Need to Produce Health “Better, Faster, and Cheaper” Annual Percent Changes per Capita in Health Care Expenditures and in Average Hourly Wages for Workers in All Industries, 2000 through 2003 With the exception of the mid-1990s, health insurance premium increases have generally exceeded the rate of increase in the Consumer Price Index, as well as worker earnings. This also reflects the health insurance underwriting cycle in that health plans that suffered losses by underpricing competitors in a highly competitive market now seek to restore profitability. Furthermore, the consolidation of health plans has significantly reduced competition. Data are from Strunk and Ginsburg, 2004. Dental work by Dr. Milstein. g:\hcgb\mas\milstein\meetings\HIT Summit West 03-07-05 (SF).ppt

Initiation of new navigational tools and incentives Actual Reduction in Spending Trend Without Quality Compromises: Outswimming the Shark in Nevada vs. 12% trend Per Capita Health Care Spending (Low Wage Hotel Workers in Nevada) Initiation of new navigational tools and incentives

Success Required Two New MD Performance Measurements (a real MD distribution from a comparatively efficient city; also applies to care management & treatment options) 50th %ile Low Longit. Efficiency High Quality High Longit. Efficiency High Quality (Dream Suppliers) MD Quality Index (outcomes or % adherence to EBM) Lower Higher 50th %ile Low Longit. Efficiency Low Quality (Nightmare Suppliers) High Longit. Efficiency Low Quality Lower Longit. Efficiency/ Higher Cost Higher Longit. Efficiency/ Lower Cost MD Longitudinal Cost Efficiency Index AKA “TCO” (average total cost per acute episode or year of chronic care) Adapted from Regence Blue Shield g:\hcgb\mas\milstein\meetings\HIT Summit West 03-07-05 (SF).ppt

Inducing Rapid and Continuous IT-enabled Re-Engineering of Health “Production” is the only Alternative to Social Divisiveness 50th %ile Continuous Efficiency Gains Offset Cost of Medical Miracles Low Longit. Efficiency High Quality High Longit. Efficiency High Quality (Best) MD Quality Index (outcomes or % adherence to EBM) 50th %ile Lower Higher Low Longit. Efficiency Low Quality (Worst) High Longit. Efficiency Low Quality Lower Longit. Efficiency/ Higher Cost Higher Longit. Efficiency/ Lower Cost MD Longitudinal Cost Efficiency Index (total cost per case mix-adjusted treatment episode) Adapted from Regence Blue Shield g:\hcgb\mas\milstein\meetings\HIT Summit West 03-07-05 (SF).ppt

A Purchaser and Consumer Near-Term Vision: High “PPSI” (PPSI=Provider Performance Sensitivity Index) Americans High Q 50 ppts $ 40 ppts Chasm Crossing Consumerism (Tiered Plans w or w/o Spending Accounts) & P4P “PRN” Clinical re-engineering by MDs, hospitals & hlth risk reductn programs Value from Health Benefits Spending (Health Gain / $) Performance Transparency (Quality & Cost Efficiency)  Market sensitivity to hospital & MD performance Performance comparisons for hospitals, MDs & treatments Q = % adherence to evidence-based rules $ = Per capita health care spending. Includes new investment in IT / industrial engineering capability. Excludes impact of inflation, aging and biomedical innovation Low 2002 Evolutionary Path 2012 g:\hcgb\mas\milstein\meetings\HIT Summit West 03-07-05 (SF).ppt

A Nearly Identical IOM Vision EMPLOYERS CARE SYSTEM OUTCOMES Supportive market environment Organizations that facilitate the work of patient-centered teams High performing patient-centered teams Safe Effective Efficient Personalized Timely Equitable GOVT & PLANS CARE SYSTEM RE-DESIGN IMPERATIVES Redesigned care processes Effective use of information technologies Knowledge and skills management Development of effective teams Coordination of care across patient conditions, services, and settings over time Use of performance and outcome measurement for continuous quality improvement and accountability   Adapted from Crossing the Quality Chasm, IOM, 2001.

When is Paying Extra Not Crazy? To jumpstart provider prioritization of performance management & required infrastructure (industrial engineers & IT) To motivate provider oligopolists To overcome the practical, psychological & ethical limits of health care consumerism To help form a critical mass of regional purchasers (Per Deming, utilize P4P a last resort) g:\hcgb\mas\milstein\meetings\HIT Summit West 03-07-05 (SF).ppt

A Provider IT Reward Contingency Sequence That Makes Sense to Purchasers (In Partnership with CMS) 2003: Meets AHRQ/CMS/Leapfrog PODS/CPOE leaps or NCQA PPC certification 2004: Achieves additional locally-specified e-health capabilities (eg IHA, BTE, insurers) 2006: Uses CCHIT certified product 2006: Uses CCHIT certified product and achieves highest level of CSI specified connectivity 2006: Passes Leapfrog/AHRQ CPOE challenge test 2007: Performs in top quartile on aggregate measures of quality and longitudinal cost efficiency g:\hcgb\mas\milstein\meetings\HIT Summit West 03-07-05 (SF).ppt

How Soon Can We Reduce P4P? How Soon Will Congress… Speed universal provider performance transparency via exchange of CMS claims data with private sector plans, subject to strict patient privacy protection? Encourage all U.S. health benefits plans to tailor consumer cost-sharing to the “TCO” and quality of individual physicians, hospitals, and treatment options (via CMS, tax and/or competition policy)? Increase the sensitivity of all U.S. plans’ cost-sharing to provider performance (especially individual MDs) until America steadily outswims the shark? g:\hcgb\mas\milstein\meetings\HIT Summit West 03-07-05 (SF).ppt