Pay-for-Performance Programs: the U.S. Experience Eric Schneider, M.D., M.Sc. Harvard School of Public Health Brigham and Womens Hospital Boston, MA

Market-oriented strategies for health care: a 20-year journey Performance Visibility Performance Rewards PeersPatientsPublicPurchasers Performance Feedback Market Share Payments & Penalties Report CardsP4P

Public Reporting: Limited Evidence of Impact Cardiac surgery patients did not use risk- adjusted mortality results on hospitals, surgeons Consumers are often befuddled by report cards Scant evidence that consumers use health plan report cards to select plans

PATHWAY 1 Results (Performance) Knowledge about Performance Knowledge about Process and Results Care Delivery Teams and Practitioners ChangeSelection Measurement for Improvement Organizations Consumers Purchasers Regulators Patients Health Plans Clinicians Accreditors Selection & Accountability Purpose of Measurement Goals PATHWAY 2 Two Pathways to Quality Improvement Motivation $$$

The PAY in Pay-for-Performance Total U.S. Health Expenditures (2001) = $1.4 trillion Source: Katharine Levit, et al., Trends in U.S. Health Care Spending, 2001, Health Affairs (January/February 2003) 5% 17% 16% 13% 35% 14%

Private Payers: 242 U.S. Health Plans on P4P 71% had programs to pay for performance 68% had P4P for physicians 42% had P4P for hospitals Survey Data, 2005

Private Health Plans: Expanding Scope of P4P Broad range of total dollars and ambition –Thinking about it –Modest payments, a few specific measures –Large payments, many measures, grants for IT –Tiered networks

Public Payers: Many New Demonstration Projects Under Way Centers for Medicare and Medicaid Services –Premier Hospital Demonstration –Physician Voluntary Reporting Initiative Medicaid state agencies –Eleven state agencies using some form of P4P with health plans –Center for Health Care Strategies (CHCS) recently initiated P4P Purchasing Institute for Medicaid agencies

Premier Hospital Demo hospitals participate voluntarily 34 process and outcome measures –Heart failure, heart attack, pneumonia, coronary artery bypass graft and knee replacements Hospitals can receive bonus based on performance –Top decile: 2% bonus on DRG payment for the condition –Second decile: 1% bonus Year 1 bonus incentive payments: –$900 to $847,000

P4P: Does it Work? Early Results Paint a Nuanced Picture Quality improved –Pre-post evaluations without control groups Quality improved slightly or not at all –Quasi-experiments with contemporaneous comparison groups Success and failure appear related to many complex factors –Program design –Implementation

Factors Related to P4P Success and Failure Sponsor leverage in fragmented payment environments Amount of incremental revenue Selection, scope, and perceived validity of quality measures Design of payout (low-performing practices?) Readiness of physician practices for QI Effectiveness of QI innovations

Concerns about P4P in the U.S. Business model for development and maintenance of standardized quality and efficiency measure sets? Is the data infrastructure adequate for valid measures? How will gaming be addressed? Is new money needed to retool MD practices? Will P4P undermine professionalism? Will P4P impede access and increase socioeconomic disparities in quality?

Conclusions Pay-for-performance has captured attention First formal evaluations show mixed results Many questions remain unanswered, but funding for rigorous evaluation may be limited