Pay-for-performance.. Can it deliver? Dale W. Bratzler, DO, MPH QIOSC Medical Director

What’s driving policy on health care?

US Healthcare Spending Problem #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; Research in Action Issue 19. AHRQ Pub. No

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

Spending is Unevenly Distributed Age Distribution of the Top 5%

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

Care of Patients with Chronic Illness New Study Shows Need for a Major Overhaul of How United States Manages 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 the time, 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, suddenly finds itself mired in serious questions about the ability of its hospitals and doctors to deliver quality care to millions. Medical errors corrode quality 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:

Quality from the Patient’s Perspective Hospital Quality Measures, Qtr. 4, 2005 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) + D ata 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 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-Performance Much to be learned While there are lots of demonstrations, there is little evaluative data at this time

Ann Intern Med. 2006;145:

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:

HQID Hospital Participation Voluntary Eligibility: Hospitals in Premier Perspective system as of March 31, hospitals started Demonstration Project: Pilot test of concept Can economic incentives effectively improve quality of care?

1st Decile Hospital Year OneYear TwoYear Three Top Performance Threshold Payment Adjustment Threshold 2nd Decile 3rd Decile 4th Decile 5th Decile 6th Decile 7th Decile 8th Decile 9th Decile 10th Decile 1st Decile 2nd Decile 3rd Decile 4th Decile 5th Decile 6th Decile 7th Decile 8th Decile 9th Decile 10th Decile 1st Decile 2nd Decile 3rd Decile 4th Decile 5th Decile 6th Decile 7th Decile 8th Decile 9th Decile 10th Decile Condition X

Results show significant improvement

CMS/Premier HQI Project Reduction in Variation 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:

1st Decile Hospital Year OneYear TwoYear Three Top Performance Threshold Payment Adjustment Threshold 2nd Decile 3rd Decile 4th Decile 5th Decile 6th Decile 7th Decile 8th Decile 9th Decile 10th Decile 1st Decile 2nd Decile 3rd Decile 4th Decile 5th Decile 6th Decile 7th Decile 8th Decile 9th Decile 10th Decile 1st Decile 2nd Decile 3rd Decile 4th Decile 5th Decile 6th Decile 7th Decile 8th Decile 9th Decile 10th Decile 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 Consequences Direct 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 Consequences Indirect 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, 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