California Pay for Performance:

Understanding the Impact of Provider Incentives for Quality

Tom WilliamsExecutive Director

Integrated Healthcare Association

AHRQ Annual Conference

September 9, 2008

IHA Sponsored Pay for Performance (P4P) Program

The goal: To create a compelling set of incentives that will drive breakthrough improvements in clinical quality and the patient experience through:

√ Common set of measures √ A public scorecard√ Health plan payments

2

Plans and Physician Groups – Who’s Playing?

Health Plans:• Aetna• Blue Cross• Blue Shield • Western Health

Advantage

Medical Group and IPAs:• 230 groups • 35,000 physicians

* Kaiser participates in the public reporting only

12 million HMO commercial enrollees

• CIGNA• Health Net of CA• Kaiser*• PacifiCare/United

3

Measurement Year Domain Weighting

Domain 2003-6 2007 2008 2009

Clinical 40-50% 50% 40% 40%

Patient Experience 30-40% 30% 25% 20%

IT Adoption 10-20% X X X

IT Systemness X 20% 15% 20%

Coordinated Diabetes Care

X X 20% 20%

Appropriate Resources Use

X X X Gain-sharin

g

4

Public Reporting

5

Health Plan Payments • Each health plan determines their own reward

methodology and payment amount

• Most plans pay on relative performance, after meeting thresholds

− $38 M paid out in 2004− $54 M paid out in 2005− $55 M paid out in 2006 − $65 M paid out in 2007

(about 1.5 to 2% of base pay on average)

• Total paid from 2004 through 2007 (for prior measurement year) is over $ 210 million

6

Physician Group Engagement

Program Strengths - Physician groups are highly engaged, 74% believe the measures are reasonable, widespread support for increased incentives, and belief the program has increased the focus on quality improvement and IT capabilities.

Program Weaknesses - Lack of consumer interest in public reporting and concern about the potential for too many measures.

Overall Rating - 65% rated the program as a “4” or “5” (on a 1 to 5 scale) for importance with a mean score of 3.86.

Source: Program Evaluation by RAND/UC Berkeley

Health Plan Engagement

Program Strengths - Increased collaboration, push toward QI, investments in IT, and greater accountability and transparency.

Program Weaknesses - Improvements viewed as marginal, concerns about “teaching to the test”, lack of a positive ROI, and failure of clinical data fed to raise plan HEDIS scores.

Overall Rating - 2.5 mean score (1 to 5 pt. scale)

Source: Program Evaluation by RAND/UC Berkeley

9

Lessons Learned #1: Measures

Lesson• Clinical

improvement has been incremental

• Evidence points to “teaching to the test” vs. systemic improvements

P4P Response• Created Coordinated

Diabetes Care Domain to focus attention on redesign needed to drive breakthrough improvement

• Considering use of multiple chronic care measure domains integrated with care process measures to drive systemic change

10

Summary of Performance Results• Clinical: continued modest improvement on most

measures − 5.1 to 12.4 percentage point increases since

inception of measure• Patient experience: scores remain stable but show

no significant system wide improvement • IT-Enabled Systemness: most IT measures are

improving− Almost two-thirds of physician groups

demonstrated some IT capability− Almost one-third of physician groups demonstrated

robust care management processes

Continued performance improvements but

“breakthrough” point not achieved yet.

11

Clinical Results Baseline – MY 2007

0

10

20

30

40

50

60

70

80

90

100

Breast CancerScreening

HbA1c Screening ChlamydiaScreening

ChildhoodImmunizations

AppropriateMedication for

Asthma

Appropriate URITreatment

Baseline MY 2006 MY 2007

California P4P Program

California P4P HEDIS Scores Surpass National Average

• The national average outperformed the California plans in the baseline year 2002• The California plans rate of improvement over the baseline year has increasingly exceeded the rate of improvement of the national average• In MY 2006, the California plans outperformed the national average performance• Includes commercial plans and excludes Kaiser (Not fully in P4P until 05)

(NCQA Study, 2007)

12

Average HEDIS P4P Score California Plans vs. National Plans

72.8

77.6

71.8

77.1

70.3

67.6

78.3

73.5

68.4

78.3

62

64

66

68

70

72

74

76

78

80

MY02 MY03 MY04 MY05 MY06Measurement Year

Mea

n R

ate

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Ra

te o

f Im

pro

ve

me

nt

CA Rates

Ntl Rates

CA Rate of Improvement

Natl Rate of Improvement

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IT Measure 1: Population Management Activities

0

10

20

30

40

50

60

Patient Registry Actionable Reports HEDIS Results

Percentageof Groups

MY 2003 MY 2004 MY 2005 MY 2006 MY 2007

California P4P Program

14

IT Measure 2: Point-of-Care Activities

0

5

10

15

20

25

30

35

40

45

ElectronicPrescribing

ElectronicCheck of

PrescriptionInteraction

ElectronicRetrieval ofLab Results

ElectronicAccess ofClinicalNotes

ElectronicRetrieval of

PatientReminders

AccessingClinicalFindings

ElectronicMessaging

MY 2003 MY 2004 MY 2005 MY 2006 MY 2007Percentage of Groups

California P4P Program

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Lesson• Wide variation

across regions exists; contributes to overall “mediocre” statewide performance

• Big gains possible with focused attention on certain regions

P4P Response• Pay for and

recognize improvement (20% of payment for 2007)

• More fundamental change in calculus of payment for improvement for 2008/09 using CMS approach

Lessons Learned #2: Regional Variability

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Health Disparities and California P4P: Clinical Performance Variation

50

55

60

65

70

75

80

85

90

Inland Empire

Los Angeles

Central Coast

Central Valley

San Diego

Orange County

Bay Area

Sacramento/North

Statewide

MY 2006 Results by Region

Top Performing Groups

60

62

64

66

68

70

72

74

76

78

80

Inland Empire Bay Area

All GroupsP4P

Per

form

ance

Sco

re

Clinical Performance

Health Disparities and California P4P:A Tale of Two Regions

Health Disparities and California P4P:A Tale of Two Regions

Inland Empire Bay Area

PCPs/100K Pop. 53 116

% Pop. Medi-Cal 17% 12%

% Hispanic 43% 21%

Per Capita Income $ 21,733 $ 39,048

60

65

70

75

80

85

90

Inland Empire Bay Area

All Groups

Top PerformingGroups

P4P

Per

form

ance

Sco

re

Clinical Performance

Health Disparities and California P4P:A Tale of Two Regions

Are Quality Disparities Correlated with Physician Reimbursement Disparities?

The data and subjective experience suggest:

Physicians groups, located only in geographies with low socioeconomics, receive disproportionately lower reimbursement across their practice, resulting in diminished physician and organizational capacity, reducing both access and quality of healthcare, even in a uniformly, well-insured population.

P4P Payment Incentives

• Fundamental reimbursement disparities appear to be the main culprit; however P4P should at a minimum not increase reimbursement disparities

• Payment for absolute and relative performance should be balanced with payment for improvement

Paying for Improvement

Survey Response: What % of total bonus payments by health plans should be allocated to improvement vs. relative performance? (n=200, IHA Stakeholders meeting, 10/4/07)

Paying for Performance & Improvement

Earning Quality Points ExampleMeasure: Pneumococcal Vaccination

Attainment Threshold.47

Benchmark.87

Attainment Threshold.47

Benchmark.87

Attainment Range

performance

Hospital I

baseline•.21

.70•

Attainment Range1 2 3 4 5 6 7 8 9

Attainment Range1 2 3 4 5 6 7 8 9

Hospital I Earns: 6 points for attainment7 points for improvement

Hospital I Score: maximum of attainment or improvement= 7 points on this measure

Improvement Range1 2 3 4 5 6 7 8 9• • • • • • • • •

• • • • •

Score

Score

Excerpt from CMS Hospital Value-Based Purchasing Listening Session #2, April 12, 2007

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Lesson Learned #3: Incentives

Lesson• Incentives may

not be properly targeted or structured to achieve desired outcomes

• Amount of pay must keep pace with number of measures

P4P Response• Increased attention to

“pay”− Resolved antitrust

concerns; formed Payment Committee

− Reduce payment variability through methodology recommendations, including minimum payment

− Eliminate “black box” by advanced notice of payment methodology

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Lesson Learned #4: AffordabilityLesson• Diminishing

affordability of coverage demands greater attention to cost

• Health plan commitment is wavering in the absence of a clear ROI

P4P Response• Implement cost efficiency

and appropriate resource use measures and gain sharing incentives.

• Develop business case and ROI− develop method to

measure ROI− move HEDIS scores to

higher levels of performance versus nation

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Cost Efficiency Measurement

• Episodes of care testing

• Resource use measure development and implementation (e.g., readmission w/in 30 days)

• Hospital P4P under consideration

• Incentives based upon gain sharing

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California Pay for Performance

For more information: www.iha.org (510) 208-1740

Pay for Performance has been supported by major grants from the California Health Care Foundation