Paying Physicians for Quality: Lessons from Employers

The House Committee on Energy and Commerce Subcommittee on Health recently held hearings on how to replace the broken sustainable growth rate (SGR) tool for controlling Medicare spending on physician services. I was asked to speak for major employers about their efforts to improve health care quality while containing cost.

Why did the subcommittee invite a business group representative to testify? And why should businesses care about how Medicare pays physicians?

The answer is that employers and the federal government are both major purchasers of health care, and we want government to look to the private sector for ideas to accelerate innovation in how we pay for care. Both public and private purchasers have a stake in building a system based on innovation, value, and measuring what matters.

The Pacific Business Group on Health’s (PBGH) 60 member companies provide health care to 10 million employees and their dependents in all 50 states. For decades, large and small employers alike have been frustrated by the rising costs and inconsistent quality of health care. A major reason for these problems is that the current payment system rewards physicians for more office visits, tests, and procedures, regardless of whether they are needed or result in better health. We need a better, more effective method of physician payment. PBGH members have real-world experience designing and implementing innovations in how providers deliver care and how they are paid for it. Medicare can learn from these efforts to improve quality and control costs.

One example of large employers supporting new approaches to the delivery of care is the Intensive Outpatient Care Program (IOCP) piloted by Boeing and adopted by other large employers. The IOCP focused on the 5 to 20 percent of patients who incur the highest costs. Each primary care practice or medical group in the program created a new ambulatory intensivist practice to proactively coordinate and manage its patients’ care, while also expanding its patients’ access to care. Each primary care site was paid a monthly case rate to cover care coordination and non-traditional services. Over a two-year period, the initial pilot achieved a 28 percent reduction in hospital admissions and a 20 percent reduction in cost for these patients, while improving quality and patient access to care.

That’s innovation worth promoting.

Large employers want to tie physician payment directly to the value of the services that physicians provide—including clinical quality, patient-reported outcomes, and total cost of care. A good example is several employers that contracted directly or through their plan partners with Hill Physicians Group in Northern California. Hill Physicians Group bases a significant portion of its physicians’ payments on value, as measured in part by resource utilization and clinical quality—not just the volume of services— and it is consistently rated highly for performance.

Medicare should join with private sector leaders to reward high performers at a level that drives improved quality. Medicare has taken steps toward replacing its current fee-for-service system by experimenting with value-based payment strategies—among them penalizing for excessive hospital readmissions and advancing demonstrations of accountable care organizations and patient-centered medical homes. But our goal must be a payment system aligned across the public and private sectors that is fully based on performance, with the goal of achieving measureable improvements in quality and affordability.

That’s value.

Finally, we need to develop more and better performance measures that matter to patients and employers. Among the nearly 700 measures endorsed to date by the National Quality Forum, the large majority are clinical process or structural measures. While these can be valuable for quality improvement initiatives by providers, they do not provide information about the things patients and employers care about most—patient-reported outcomes, patient experience of care, care coordination, appropriateness of care, and total resource use.

Working with the California Orthopedic Association and the California HealthCare Foundation, PBGH launched the California Joint Replacement Registry. The registry collects and reports scientifically valid data on the results of hip and knee replacements performed in California, including device safety and effectiveness, post-operative complication and revision rates, and patient-reported assessments. It encourages quality and cost improvements by using performance information to guide physician and patient decisions and supporting programs for provider recognition and reward.

We strongly recommend that Congress support the rapid development and use of better performance measures. These measures should be selected based on input from physicians, but the primary consideration should be to meet the needs of those who receive and pay for care—patients and employers.

That’s measuring what matters.

Large employers know that alone, we lack the scale to drive system-wide change and improve health care across the nation. We need America’s largest health care purchaser, the federal government, to join our efforts and apply its purchasing strategies as purposefully as businesses do.

We ask Congress to be thoughtful in how it replaces the SGR. As a new system of physician payment is developed and rolled out, we ask Congress to align it with the private sector. PBGH strongly supports the replacement of the SGR, but only if the new payment system results in significant improvements in health care quality and affordability.

Our nation desperately needs to improve its health care system, and the SGR replacement is a rare opportunity to give it a shot in the arm. PBGH applauds Congressional efforts to get it right, and we offer our real-world experience and expertise to advance this important initiative.

Bill Kramer is executive director for National Health Policy at the Pacific Business Group on Health.


5 replies »

  1. Please. The whole point of “pay for performance” is to pay physicians *less* for the same performance. This is a game that insurers and administrations are playing with us. Amazingly, patients we don’t take care of, or who are not compliant, show up on our panels magically, decreasing our pay. I can’t imagine how that happens…

  2. I still get concerned about paying hospitals and physicians for better quality, when it is our job from the beginning to do so. We are suppose to do no harm and also we are Accountable for Patient Care. There are models that exist like Geisinger, that have been successful for many years, clinically and financially.
    If a physician or hospital causes harm, then they shouldn’t be paid anything. When the PPMI program was rolled out a few years ago, we were rewarding compliance to doing BS and HgA1C’s in diabetic patients…………that is what you are suppose to do for a diabetic patient.
    When people discuss the cost of healthcare………what is it? Lab tests that do cost $25 can be charged at $250+. A $1 IV bag at $88. The system can be fixed if everyone can get together, sit down and come to reasonable methods.
    The US does pay for 75% or more of the research in the world….this contributes to higher drug and device costs. Is that fair? In Europe, companies are told by the government what they will pay for a drug or device. Patients have longer length of stays, but their cost for the LOS is less………..how?

  3. The idea of “pay for performance” is not going to work. It’s already bad enough with insurance companies barely reimbursing physicians. When they start telling you that you will get less because of “performance,” it will make physicians choose to care for only the healthiest of patients. You will be refused care at the physician level. Additionally, does it make sense to reimburse a surgeon for the “quality” of the surgery, not the number of surgeries he or she performs? Should they be reimbursed only if the patient lives? Does McDonald’s get reimbursed for the number of hamburgers it sells or the “quality” of the hamburgers? Health care in the US is a messed up system, but this is not the answer.

  4. This idea has been tried before, in the name of capitation with HMOs in the mid 1990s. We all know how that turned out.

    “Healthcare quality consultants” have never treated an actual patient, yet they pretend to be “experts” on quality healthcare.

    How many MILLIONS in middle-man fees are these companies paying PBGH?

  5. The joke is that the less they pay physicians, the greater the inflation in health care costs. Considering that not a penny can be spent without the doctor’s orders, one would think that Congress woul pay them well to do the right thing.

    Btw, the EHR and CPOE fiasco will run up costs, radically, sans improving outcomes.