Pay for Performance
The most commonly heard comment in healthcare these days is that we have to move from paying for volume to paying for value. While it may sound trite, it also turns out to be pretty true. Right now, most healthcare services are paid for on a fee-for-service basis – with little regard for the quality of that service. We clearly need to move towards value-based payments (sometimes referred to as pay-for-performance or P4P).
Although a few folks remain skeptical about whether VBP/P4P can work (as though our pay for volume strategy is working out so well), asking whether we should pay for volume versus pay for quality no longer seems like a particularly interesting question.
The far more compelling and difficult question is how best to pay-for-performance? As I have written before, we need bold experiments with new payment models that employ three key principles: putting real money on the table, focusing on outcomes, and keeping the reward system simple (i.e. the better you do, the more you should get).
One such new payment model is the value-based purchasing (VBP) program from CMS, the largest payer of hospital care in America. It’s a modest program but an immensely important one. It is modeled after the Premier Hospital Quality Incentives Demonstration (HQID), which ran for 6 years and had modest effects on hospital performance on process measures and no effect on patient outcomes.
Despite these disappointing findings, the U.S. Congress, in crafting the Affordable Care Act, modeled VBP closely on HQID. The incentives in the program are small (currently at 1.25% of total Medicare payments) and still more heavily weighted towards process measures than outcomes.
The key question for VBP is whether it will work – whether patients will be better off because of it. We don’t know and realistically, we won’t for another year or so.
But what we do know is that two years into the program, certain hospitals seem to be doing well and others, not so much. Yes, the incentives are small and my guess is that any impact will be very modest as well. But, it’s still worth taking a look at how different types of hospitals are faring under VBP.
So we ran some numbers.
Continue reading “Finding the Value in Value-Based Purchasing”
Filed Under: Hospitals, THCB
Tagged: Ashish Jha, Costs, Hospitals, Pay for Performance, Value-based Purchasing
Nov 20, 2013
There’s been a great deal of discussion about health care payment reform. Prominent in this discussion is “Pay for Performance” (P4P). The idea is simple — rather than pay providers based on volume of care (fee-for-service) or number of patients (capitation), tie their payment to a measure(s) of performance. There has been substantial concern about the quality of care delivered to patients, so pay for performance appears to make a lot of sense. Don’t we want to reward providers for good performance? Shouldn’t this encourage them to provide high quality care?
Unfortunately, this is not as straightforward as it might appear. While the idea of pay for performance is very appealing and intuitive, there are some major pitfalls in implementation.
Continue reading “The Promises and Pitfalls of Pay for Performance”
Filed Under: Hospitals, The Business of Health Care
Tagged: Economics, health economics, Hospitals, Incentives, Martin S. Gaynor, Medicare, Pay for Performance, payment reform, Quality
Mar 3, 2013
These should be the best of times for the patient safety movement. After all, it was concerns over medical mistakes that launched the transformation of our delivery and payment models, from one focused on volume to one that rewards performance. The new system (currently a work-in-progress) promises to put skin in the patient safety game as never before.
Yet I’ve never been more worried about the safety movement than I am today. My fear is that we will look back on the years between 2000 and 2012 as the Golden Era of Patient Safety, which would be okay if we’d fixed all the problems. But we have not.
A little history will help illuminate my concerns. The modern patient safety movement began with the December 1999 publication of the IOM report on medical errors, which famously documented 44,000-98,000 deaths per year in the U.S. from medical mistakes, the equivalent of a large airplane crash each day. (To illustrate the contrast, we just passed the four-year mark since the last death in a U.S. commercial airline accident.) The IOM report sparked dozens of initiatives designed to improve safety: changes in accreditation standards, new educational requirements, public reporting, promotion of healthcare information technology, and more. It also spawned parallel movements focused on improving quality and patient experience.
As I walk around UCSF Medical Center today, I see an organization transformed by this new focus on improvement. In the patient safety arena, we deeply dissect 2-3 cases per month using a technique called Root Cause Analysis that I first heard about in 1999. The results of these analyses fuel “system changes” – also a foreign concept to clinicians until recently. We document and deliver care via a state-of-the-art computerized system. Our students and residents learn about QI and safety, and most complete a meaningful improvement project during their training. We no longer receive two years’ notice of a Joint Commission accreditation visit; we receive 20 minutes’ notice. While the national evidence of improvement is mixed, our experience at UCSF reassures me: we’ve seen lower infection rates, fewer falls, fewer medication errors, fewer readmissions, better-trained clinicians, and better systems. In short, we have an organization that is much better at getting better than it was a decade ago. Continue reading “Is the Patient Safety Movement in Critical Condition?”
Filed Under: Hospitals, THCB
Tagged: ACOs, Bob Wachter, Costs, Gary Kaplan, Hospitals, Lucien Leape Institute, Patient Safety, Pay for Performance, physician burnout, The Affordable Care Act
Feb 18, 2013
The expansion of health insurance coverage may be the most visible aspect of health reform, but other elements will ultimately have a significant impact on how we all experience health care. One pivotal change is how health care organizations are paid. New payment approaches will reward providers based on whether services actually improve patients’ health and keep costs down versus simply incentivizing them to provide more care.
One of the more consequential changes will be a greater focus on helping patients to be more involved in their care. There is ample evidence that the behaviors people engage in and the health care choices they make have a very clear effect on both health and costs, positively and negatively. The most innovative health care delivery systems recognize this and see their patients as assets who can help them achieve the goals of better health at lower costs. From this point of view, “investing” in patients and helping them to be more effective partners in care makes good sense.
Our study, reported in the February issue of Health Affairs, highlights this role that patients play in determining health-related outcomes. We found that patients who were more knowledgeable, skilled and confident about managing their day-to-day health and health care (also known as “patient activation,” measured by the Patient Activation Measure) had health care costs that were 8 percent lower in the base year and 21 percent lower in the next year compared to patients who lacked this type of confidence and skill. These savings held true even after adjusting for patient differences, such as demographic factors and the severity of illnesses.
Even among patients with the same chronic illness, those who were more “activated” had lower overall health care costs than patients who were less so. Among asthma patients, the least activated patients had costs that were 21 percent higher than the most activated patients. With high blood pressure, the cost differential was 14 percent.
Continue reading “Engaged Patients Translate to Better Outcomes and Costs”
Filed Under: THCB, The Business of Health Care
Tagged: Costs, Health Affairs, Incentives, Insignia Health, Jessica Greene, Judith Hibbard, Outcomes, Patient Activation Measure, patient engagement, Pay for Performance, The Affordable Care Act
Feb 10, 2013
Over the past decade, there has been yet another debate about whether pay-for-performance, the notion that the amount you get paid is tied to some measure of how you perform, “works” or not. It’s a silly debate, with proponents pointing to the logic that “you get what you pay for” and critics arguing that the evidence is not very encouraging. Both sides are right.
In really simple terms, pay-for-performance, or P4P, can be thought about in two buckets: the “pay” part (how much money is at stake) and the “performance” part (what are we paying for?). So, in this light, the proponents of P4P are right: you get what you pay for. The U.S. healthcare system has had a grand experiment with P4P: we currently pay based on volume of care and guess what? We get a lot of volume. Or, thinking about those two buckets, the current fee-for-service structure puts essentially 100% of the payments at risk (pay) and the performance part is simple: how much stuff can you do? When you put 100% of payments at risk and the performance measure is “stuff”, we end up with a healthcare system that does a tremendous amount of stuff to patients, whether they need it or not.
Against these incentives, new P4P programs have come in to alter the landscape. They suggest putting as much as 1% (though functionally much less than that) on a series of process measures. So, in this new world, 99%+ of the incentives are to do “stuff” to patients and a little less than 1% of the incentives are focused on adherence to “evidence-based care” (though the measures are often not very evidence-based, but let’s not get caught up in trivial details). There are other efforts that are even weaker. None of them seem to be working and the critics of P4P have seized on their failure, calling the entire approach of tying incentives to performance misguided.
The debate has been heightened by the new national “value-based purchasing” program that Congress authorized as part of the Affordable Care Act. Based on the best of intentions, Congress asked Medicare to run a program where 1% of a hospital’s payments (rising to 2% over several years) is tied to a series of process measures, patient experience measures, and eventually, mortality rates and efficiency measures. We tried a version of this for six years (the Premier Hospital Quality Incentives Demonstration) and it didn’t work. We will try again, with modest tweaks and changes. I really hope it improves patient outcomes, though one can understand why the skeptics aren’t convinced. Continue reading “Getting Pay-For-Performance Right”
Filed Under: Hospitals, THCB
Tagged: Ashish Jha, Hospitals, Incentives, JAMA, Medicare, Outcomes, Pay for Performance, Quality, The Affordable Care Act, Transparency, Value-based Purchasing
Feb 4, 2013
The debate over pay for performance in healthcare gets progressively more interesting, and confusing. And, with Medicare’s recent launch of its value-based purchasing and readmission penalty programs, the debate is no longer theoretical.
Just in the past several months, we’ve seen studies showing that pay for performance works, and others showing that it doesn’t. We’ve heard from some theorists who describe P4P as sapping intrinsic motivation and doing violence to professionalism, and others who feel that its effects are as natural and predictable as water running downhill. Some commentators beg us to stop it, while others denounce P4P’s current incarnations as too wimpy to work and recommend they be turbo-charged.
If we weren’t talking about the central policy question of a field as important as healthcare, we could call this a draw and move on. But the stakes are too high, so it’s worth taking a moment to review what we know.
In the U.S., the main test of P4P has been Medicare’s Hospital Quality Incentive Demonstration (HQID) program. A recent analysis of this program, which offered relatively small performance-based bonuses to a sample of 252 hospitals in the large Premier network, found that, after 6 years, hospitals in the intervention group had no better outcomes than those (3363 hospitals) in the control arm. Prior papers from the HQID demonstrated mild improvements in adherence to some process measures, but – as in a disconcerting number of studies – this did not translate into meaningful improvements in hard outcomes such as mortality.
Continue reading “Pay for Performance in Healthcare: Do We Need Less, More, or Different?”
Filed Under: Hospitals, THCB
Tagged: Bob Wachter, hospital readmissions, Pay for Performance, readmission penalty, The Affordable Care Act
Nov 25, 2012
Last week I attended a conference on health policy at the University of Chicago, where I moderated a panel that examined implementation of the Affordable Care Act. For much of our time, the panel focused on Accountable Care Organizations. Panelists and attendees wondered whether ACOs would meet the same fate as Integrated Delivery Systems of the 1990s. Some in the audience mentioned that when it comes to integration, electronic medical records could be a game changer. EMRs could be used to monitor and reward cost saving decision making, for example. But most ACOs are still figuring out how to use EMRs for clinical decision making; their use in helping managerial decision making remains far off.
As more and more speakers expressed skepticism about the future of ACOs, a physician in the audience offered a truly fresh perspective, one that makes me feel much more optimistic. I never learned this physician’s name, so I will call him Dr. Yes. Before I summarize Dr. Yes’ argument, it is helpful to turn back the clock to the late 1990s, when IDSs were taking the health industry by storm. Perhaps the defining feature of IDSs in the 1990s was the integration of hospitals and primary care physician practices. This strategy failed in large part due to classic agency problems. In a nutshell, an agency relationship can fail because of incentive problems (the principal is unable to effectively motivate the agent) or selection problems (the principal employs the wrong type of agent.) IDSs suffered both. When hospitals acquired physician practices, they converted entrepreneurs into employees who resisted any kind of incentive payments. As employees, primary care physicians did not work as hard or show as much commitment to their practices. Moreover, those physicians most eager to give up their autonomy were those looking to dial down their practices and lead the “quiet life.” In these ways, IDSs experienced both incentive and selection problems, with devastating results.
Continue reading “Dr. Yes”
Filed Under: Health Plans
Tagged: ACOs, clinical decision making, David Dranove, doctor/ patient relationship, EHR, Integrated Delivery Systems, Pay for Performance, Quality, The Affordable Care Act
Oct 19, 2012
As a cardiac electrophysiologist, I’m pretty far removed from public policy. But I have to admit that I was interested in the latest move by CMS to cut their Medicare payment rates to hospitals by invoking pay cuts for hospital readmissions. The Chicago Tribune‘s article is enlightening and filled with some interesting anecdotes after the first round of pay cuts were implemented:
(1) The vast majority of Illinois hospitals were penalized (112 of 128)
(2) Heart failure, heart attack, and pneumonia patients were targeted first because they are viewed as “obvious.”
(3) “A lot of places have put a lot of work and not seen improvement,” said Dr. Kenneth Sands, senior vice president for quality at Beth Israel.
(4) Even the nation’s #1 Best Hospital (according to US News and World Report) lost out.
So what’s a hospital to do?
Continue reading “Out of the Box Thinking on Avoiding Hospital Readmissions. Stop Trying”
Filed Under: Hospitals, THCB
Tagged: CMS, Dr. Wes, hospital readmissions, Medicare, Pay for Performance, Penalties
Sep 17, 2012
A little box pops up before him asking if he asked the patient about the exercise. He mumbles something under his breath, clicks a little box beneath the question, then moves on.
This is what medicine has become: a series of computer queries and measures of clicks. It must be measurable, quantifiable, and justifiable or it didn’t happen.
Do they ask if I asked them about if they used cocaine? Of course not: too politically incorrect.
Do they ask if I really listened to their heart? Of course not – this activity is not a paid activity.
Do they ask about the myriad of phone calls and e-mails to arrange for a procedure? Nope.
Do they measure my time with the patient when I go back to see them on the same day? Nope – not paid for.
So what’s the motivation for doctors to be doctors? Are we retraining our doctors from care-givers to data providers? What are we losing in turn?
Continue reading “The Destructiveness of Measures”
Filed Under: OP-ED, Physicians, THCB
Tagged: Data, Dr. Wes, EHR, Measurement, Pay for Performance, Quality, Quality measurement, the future of medicine
Jul 21, 2012
I’ve had a couple of meetings recently with leading figures in UK health policy – one of them a senior figure at a doctors’ organisation, the other at a private health company – who both talked excitedly about the lessons Britain could learn from the US.
That’s rarer than you might think. Our National Health Service may be cautiously embracing market-led reforms, but there’s still plenty of scepticism about the US’s full-on competitive system, and people here tend to be nervous about citing it as an inspiration.
Still, the two figures I am referring to, both leading players in the British Government’s NHS reform programme, were talking not about US healthcare as a whole, but about one particular organisation with something of a cult following on this side of the Atlantic.
I am referring to Kaiser Permanente, and its ideas are about to become very big over here.
Kaiser is one of those iconic organisations that aren’t just known for what they do, but whose names come to define their particular way of doing things – in Kaiser’s case, managed care.
It is the classic managed care organisation, running all the disparate parts of the local health system as a fully integrated whole, and deftly incentivising doctors to make sure patients receive their care in the part of the health system where it can be delivered most efficiently.
Continue reading “The KP Model in the UK”
Filed Under: The Business of Health Care
Tagged: Competition, Health Care Reform, Kaiser Permanente, Managed Care, managed care organisation, NHS, Pay for Performance, UK health system
Jun 17, 2012