A Review of National Trends Venture Advisory Services   Pay for Performance: Have Expectations Exceeded Outcomes? A Review of National Trends and Future Directions Geof Baker, Principal Venture Advisory Services

Agenda National Context Lessons Learned Release 3.0 National Context 2

Growth in P4P Programs by Sponsor Type (2003 -2009E) P4P Market Adoption Has Matured Growth in P4P Programs by Sponsor Type (2003 -2009E) No. of P4P Programs by Sponsor (2007) N=148 Source: Med-Vantage-Leapfrog 2006 National Survey with 2007 Market Updates Note: For “Other” in 2007, included disease management programs and vendors with P4P incentives under the primary program sponsor (Medicaid) and 10 projected implementations .

P4P Incentives Extend to All Providers Source: Med-Vantage-Leapfrog 2006 National Survey with 2007 Market Updates

The P4P Evolution Roadmap 1st Generation (1996-2004) 2nd Generation (2005-2007) 3rd Generation (2008-2010) Policy National Attention Measure Leadership Performance Measurement & Evidence Stewardship Growth & Sponsors Early Adopters - Early Majority (Plans – HMO Product) Late Majority (Plans, CMS, Employers) Laggards – Mature Broad Market Adoption (CMS, Medicaid) Return on Investment / Intervention “Next Wave”, Anecdotal ROI. Focus on UM measures and Rx generic substitution to save $$. “Not a Panacea.” Signs of progress: positive clinical improvement with diminishing returns. Mixed results from evaluative studies (RWJ, CMS). Confounding factors. Cost increases initially for deferred preventative care. Achieve dramatic reductions in misuse, overuse, underuse and preventable errors. Broad adoption of Erx, generic substitution @70% Additional ROI Studies. Adoption of other payment models that complement P4P. Number and Types of Measures ≈ 25 measures: PCP HEDIS, utilization, hospital chart, patient experience. ≈ 100 measures: specialty focus, process, structure, safety, HIT adoption, patient experience. ≈ 200 measures composite, outcome, & process measures. HIT adoption, risk adjust, health disparities, multi-disease states.

The P4P Evolution Roadmap 1st Generation (1996-2004) 2nd Generation (2005-2007) 3rd Generation (2008-2010) Data Source Claims, chart (hosp) Claims, some lab, Chart (hosp) Enhanced data collection (PQRI, PHR, EHR) + admin data. Data Aggregation Minimal Burdensome data collection, some aggregation Multi-payor, single platforms. clinical data exchanges (HIE). Medical practice integration using IT. Payment Method and Amounts Withhold or Bonus based payouts Threshold & ranking based performance .5-1% Hospital payout 2-5% PCP payout Differential fee schedules & bonus. Threshold based & relative improvement performance 1-2% Hospital payout 2-15% MD payout Differential fee schedules, value based payments. Relative improvement, exception reviews ≥ 10% Hospital & MD payout Integration with other Initiatives Stand alone Public reporting, Tiered Networks, HIT adoption Programs complementing P4P, patient /member incentives & engagement Reporting Annual retrospective Quarterly retrospective Point-of-care interventions (alerts, reminders)

P4P Complements Other Initiatives Standards Interoperability Data Aggregation Tiered Networks Value Based Benefit Design Health Rewards HIT Adoption HIE, ERx, EHR Payment Reform Pay-for-Reporting Pay-for-Process - Data Quality Integrated Care Management Public Reporting Transparency Recognition Medical Home Provider Engagement Best Practices Pay for Performance

Reasons for Implementing P4P Programs  Criteria for Implementing P4P Mean 2006 (n=62) 2005 (n=60) 2004 (n=50) Improve patients’ clinical outcomes 4.63 4.36 4.60 Improve member experience (e.g., patient satisfaction) 4.00 N/A Differentiate in the market, convey positive image 3.62 3.64 Drive standardization of performance measures 3.93 Align with other initiatives (e.g., disease management, high performance networks, consumer-directed benefit designs, consumer-directed provider report cards) 3.75 3.57 4.02 Reduce medical errors/improve patient safety 3.63 3.3 3.68 Improve bottom line, lower cost 3.53 3.24 3.28 Improve data collection and reporting from providers 2.99 3.44 Respond to employer pressures 3.14 2.74 2.87 Using a scale from 1-5, where 1 equals NOT important and 5 equals VERY important Source: 2007 Med-Vantage/Leapfrog P4P Survey

Many Use P4P as a Strategy to Achieve Change Informed Understanding Access to Timely, Actionable Information Data Integrity & Quality Public Accountability Transparency Equity Multi-stakeholder Participation Legitimacy Evaluation and Continuous Quality Improvement Improving Quality of Care

Findings & Lessons Learned National Context Lessons Learned Release 3.0 Findings & Lessons Learned

Inherent Limitations ….But Here to Stay Band-Aid Rewards integrated with other initiatives Insufficient Motivation P4P payments > 10%, frequency to reinforce change Critical Mass All payer & aggregated data, uniform platforms with regional exchanges to increase sample size Diminishing Returns Outcomes/composite measures, opportunity areas, CQI culture, engage MDs, assisted interventions Gaming Exception reporting, risk adjustment Health Disparities Demographic adjustment required

Inherent Limitations ….But Here to Stay Burdensome Uniform measure sets, coordinated programs, HIT Bias Relative improvement payout models Some +gains, few wind-ups, requires iterations & reengineering, cost of care/outcome measures ROI Unknown Patient Accountability Value based benefit design, patient health rewards Latency Quarterly reporting, point-of-care interventions Single Source of Truth Data integrity, patient attribution, standards, clinical data exchanges, direct data submission, chart data

Data Submission & Integrity Direct data submission (supplement claims with collection of clinical values from registries or EHRs, lab) Multiple submission methods (secure sign-on, electronic) Standardized data field definitions All payer aggregation of admin data (claims, rx) Immediate validation / integrity checks Auditing and QA (correct coding) Help desk and training support, Models: IHA, MHQP, BTE, MN, BQI / Charter Value Exchange Multiple attribution models - what are the intended purposes?

Next Generation Release 3.0 National Context Lessons Learned Release 3.0 Next Generation Release 3.0

Anticipated Changes in P4P Programs Changes anticipated in next 2 years to P4P Program 2006 Percent (n=46) 2005 (n=82) Expand program to include other products (e.g. PPO, ASO, CDH) 20% 40% Expand program to include specialists if not doing so now 33% Expand program to include additional specialties 26% 35% Expand program to include hospitals if not doing so now 24% 27% Expand the scope or number of measures used 70% N/A Change the performance domains or relative weighting 39% 67% Develop a public performance report 43% Tie the P4P program more closely to disease management, tiered networks, or benefit design initiatives Discontinue the program 0% Other  21% Data Aggregation – Participation in state-wide, collaborative quality initiatives Source: Med-Vantage-Leapfrog, 2006 National Survey with 2007 Market Updates

Road Ahead: Key Trends for P4P CMS is now in business, More $ to incent sustained change Strategy to achieve change and sustain CQI Going beyond process measures with diminishing returns - Clinical measure impact must be demonstrable and focused Cost of care (are we reducing trends, identifying overuse, misuse?) Integration with other initiatives - HIT adoption (ERx), Medical Home, Health Rewards, Value Based Benefits, etc. Methodology: full disclosure & open standards (nyrxreport.ncqa.org) Physicians acting upon “actionable information” at point-of-care Data aggregation, clinical exchange, clinical values, enhanced collection Strong push for transparency