Is Pay for Performance
in Your Future?
July 2005
Q uality. For more than a decade this has been the hottest buzzword in health care, particularly in managed care. Clinicians, industry think-tank experts, academicians, health plan “bean counters,” and others have produced numerous studies and reports, each with its own definition of quality and how to measure it.
Yet until recently, for all the accumulated “knowledge” gleaned from countless studies, the medical community and healthcare system administrators have never been all that close to agreement. And at the heart of it all is a significant problem — practice variation.
Obviously, styles and methods of care vary from dermatologist to dermatologist. The availability of resources varies, as do techniques and skills. And so across the nation the cost to deliver similar care to a patient differs greatly.
For example, Medicare data indicate that per-capita spending in the Miami area is approximately two-and-a-half times that in Minneapolis even after the data have been “massaged” to account for age, sex and racial factors. Why is that, and does the variation tell us anything about the quality of care in Miami vs. Minneapolis? Most physicians likely would say “no,” while many non-clinicians would say “yes.”
One topic that will be getting more attention in the coming years is Pay for Performance — or, in other words, third-party plans basing reimbursements on individual performance. With more dollars spent each year to pay for increasing numbers of ever more expensive services, it’s clear that a lot of payers (including Medicare) are sinking big dollars into developing compensation systems that would move toward this standard over the next few years.
Avoiding Past Mistakes, Hopefully
Pay for Performance is a topic that’s been kicked around for more than 10 years. But just as in the days before the industry accepted HEDIS (health plan employer data information set) as a set of nationally-recognized measurements and standards, P4P, until recently, has also been very much a loose collection of potentially good proposals and standards that have not come together into a widely accepted, workable plan.
Before HEDIS, every payer was creating its own measuring instrument and standards to self-report self-serving data that made the plan look “better” than its competition. Of course, every health plan claimed its measuring instrument was valid and nobody else’s was as good. This resulted in a lot of confusion and little valid data upon which to make informed healthcare purchasing or access decisions.
And with each plan trying to implement its own measurement and reporting systems, physicians were caught in no-man’s land, having to report data in different formats to different entities. It took many years and many dollars poured down numerous rat holes until the industry came together (under a watchful government eye) to create a set of accepted measurement and reporting standards — today’s HEDIS. These standards, flawed though some may find them, are at least a uniform measure by which to compare health plan to health plan, hospital to hospital, physician group to physician group.
What Does Pay for Performance Really Mean?
The idea behind Pay for Performance is that if physician performance can be accurately measured, categorized, and reported, then health plans will have an objective means by which to pay more to better performing physicians and hospitals, and patients will have an objective means by which to select their providers. As always, the devil is in the details.
Perhaps the greatest fear for physicians regarding P4P systems is that they will have to spend ridiculous amounts of money integrating their practice management software with different payer systems to meet each plan’s particular standards for “performance.” To many, this is looking like another series of forced, unrecoverable expenses — more rat holes just over the horizon. And that concern is compounded by a fear that many of the most critical decisions will be driven by non-physicians who, when it comes to the realities of running a medical practice, just don’t “get it.”
And so, while P4P has promise, it also has the potential to be a huge boondoggle if health plans are left to individually define “quality” performance and then to set the rules for rewarding it.
One dermatologist, Diane Thaler, M.D., who is employed by an HMO in Wisconsin, is skeptical that P4P will benefit physicians.
“The pitfalls are what somebody must talk about,” said Dr. Thaler who has seen many a plan and program come and go in her lengthy career as a dermatologist. “The main questions we need to ask are ‘Who will profit and who might be hurt by this?’” Dr. Thaler explained.
“Many healthcare providers already evaluate performance to the detriment of the patient,” she added. For example, she said, “Many PAs, NPs and doctors have their patients hysterical about cholesterol levels to the exclusion of thinking about anything else. You see chart after chart about patients’ cholesterol levels,” said Dr. Thaler. “Meanwhile, the patient is dying from something else that no one has detected.
“When you start defining endpoints, then that’s what everyone focuses on,” explained Dr. Thaler.
Four Issues to Consider
In order for P4P to have a chance at success, some important issues must be considered. These include the following.
1. Does More Care Equal Better Care?
If P4P is to be successful it must work with HEDIS. Yet by nature there is a fundamental disconnect between HEDIS and Pay for Performance. Certainly as far as the payers are concerned, for HEDIS reporting more care equals or clearly infers better care (for example, raising the number and percentage of members receiving breast or colorectal cancer screenings). But the opposite applies to P4P. The basic premise of P4P is to reward physicians for providing better care rather than more care.
Last Fall, Dartmouth Medical School published the results of several studies. The school’s report directly contradicted the not-uncommon perception that the quality of care rises with the dollars spent and amount of care delivered.
In an Oct. 11, 2004, article on the Web site modernhealthcare.com, John Wenn-berg, the lead researcher and director of the Center for Evaluative Clinical Sciences at Dartmouth said: “It is clear that quality is inversely correlated with the intensity of care and that the better hospitals are using fewer resources and providing fewer hospitalizations and physician visits.”
Payers are on board with the idea of giving incentives to physicians but, at the same time, they want to reduce practice variations. The thinking is that if physicians can be “encouraged” to follow a set of uniform treatment guidelines (to also include Rx prescribing patterns, test orders, etc.), then the resulting happier, healthier patients will demonstrate which physicians are providing the best and most cost-effective care and, therefore, which physicians deserve to receive additional payments based on their clinical outcomes. Again, the devil is in the details.
2. How Much New Administrative “Hassle” Will Result?
One obvious issue is that P4P programs will require the physician to negotiate additional administrative hurdles. That is, there will be more reporting and more paperwork to
substantiate that a physician has met the higher performance levels and is eligible for the payment differentials. So in addition to the standards defining exemplary performance, the reporting mechanism(s) will be crucial to the success of any P4P program.
3. Will Physicians Change Their Behavior?
Another issue sure to stir up discussion and controversy is the idea of trying to modify physician habit and style. Clearly, every physician wants to improve quality. But traditionally, many physicians have been reluctant to participate in quality improvement programs because the programs require the practitioner to modify behavior — yet, to this point, the programs have not benefited them personally. In simplest terms, quality improvement programs of the past have not answered that very basic physician question “What’s in it for me?”
4. Will Tiered Networks Result?
Yet another concern is that some payers have announced intentions to create tiered networks — multiple provider panels that would reward patients for using practitioners deemed more
cost-effective and clinically superior. Aetna’s version, Aexcel, was launched in 2004, with plans to expand it in 2005.
Aetna states it will utilize claims data and a proprietary database to establish this network-within-a-network comprised of those physicians the payer deems the best of the best. According to a July 26, 2004, article on www.amednews.com, Aexcel will start out including cardiologists and cardiothoracic surgeons, gastroenterologists, general surgeons, OB-GYNs, orthopedists, otolaryngologists, neurologists, plastic surgeons, vascular surgeons, and urologists. Principal measurements will include hospital admission rates, total cost of in- and outpatient care, and rates of unexpected, adverse events.
Does this mean that dermatologists are exempt from P4P in the Aexcel system? Initially, perhaps, and that’s most likely because dermatology is not inpatient-oriented. But if P4P proves successful, there’s no reason to doubt that Aetna would try to find a way to apply Aexcel to a specialty that’s more typically focused on outpatient care.
The little twist in Aexcel for physicians is that they would not be paid any more for jumping through all the hoops and being named “superior.” Rather, patients would get incentives (for example, lower deductibles) to use Aetna’s Aexcel physicians rather than the non-Aexcel physicians. That, in theory, would drive more business to the better performers and benefit them financially.
However, for those not deemed “superior” the issue becomes one of suddenly being on the outside looking in — excluded from this specially-promoted sub-set of “elite” practitioners. And that certainly could have a negative effect on patient volume and cash flow.
P4P Standards — One for All and All for One?
The call for uniform P4P standards is starting to resonate loudly across the country. And keenly aware of the mess that had to be cleaned up before HEDIS came to fruition, some in the healthcare industry are looking to Congress to establish those standards.
For many, that’s a frightening thought given Congress’s inability to get much done right and in a timely manner vis-à-vis health care. But it’s also clear to many that this is a big and complicated project, even on a local basis, and Congress may prove to be the only body capable of pulling something together on a nationwide basis.
Absent a powerful, unifying (coercing?) force to convince the various players to participate under one set of rules, physicians would face impossible administrative burdens and associated costs if they were required to comply with a multitude of different programs and reporting standards developed by individual payers and other involved parties. Karen Ignagni, the President and CEO of America’s Health Insurance Plans (formerly AAHP), expressed concern about P4P going off in all sorts of directions. In a June 29, 2004, article in the publication Modern Healthcare, she stated “We have all these silos going up — Leapfrog, individual consulting companies, government agencies, employer groups — all are starting down different paths.”
Reporting Performance Results — Would It Make a Difference?
If as part of a P4P program physicians and other healthcare providers were required to report publicly the results of their performance, and if pay were tied to those results, would that dramatically reduce deaths and costs attributable to lower quality care? “Yes,” says the National Committee for Quality Assurance (NCQA).
In its 2004 annual report, NCQA noted that for calendar year 2003, 79,000 avoidable deaths and $1.8 billion of medical costs were attributable to practice variations. And with premiums rising in excess of 10% for each of the past 4 years, purchasers are paying attention.
Peter Lee, President/CEO of the Pacific Business Group on Health, commented on the NCQA’s numbers in a Sept. 23, 2004, AP News article on excite.com. He said, “This report underscores that all too often we are not getting good value for that (premium) money.” In fact, only about 25% of the population is enrolled in a health plan that reports publicly. The NCQA report also noted that plans that do report performance publicly demonstrate significant improvement in such areas as diabetes care and management, breast cancer screening, and cholesterol management.
Be a Part of the Solution
I recently read the following on an Internet practice management discussion board. An administrator related this troubling account of the practice’s first encounter with an Ohio insurer’s performance-based system.
“Last year [name of plan] did a similar type of evaluation, and those physicians who were grouped in the category that was considered to be less effective in managing costs were going to be significantly penalized.
Patients who chose to go to one of these physicians and had one of the insurance products using these categories to rate physicians would have had a much higher co-pay than if they went to a physician with a better rating from [name of plan]. The claims data they used and the analysis programs were clearly not up to the task, and we spent a fair amount of time fighting this product and this system with managers at [the plan].
For the time being they have admitted there were problems in the analysis software, and have suspended the product and the rating system, but they made it clear it would be rearing its head again. My lesson learned was to take these ratings very seriously and investigate carefully to see what data they are using to make their decisions. We found that [the plan’s] data gathering and analysis were completely misleading and inaccurate.
If you’ve learned nothing else about managed care over the past 20 years you know for certain that you have to watch out for yourself and not leave things to the bean counters.
Depending on how it’s put into action and how it then evolves and adjusts with time and data, P4P has the potential to dramatically change for the better how physicians are compensated, and legitimately reward those who can demonstrate better outcomes, happier patients, and more efficient use of resources. It could also fall flat on its face if not embraced by the physician community.
At this early stage, physicians still have the opportunity to get in on the ground floor and become involved in the development of P4P programs. For dermatologists this will likely mean becoming more closely aligned with non-skincare colleagues who are affiliated with hospitals, multi-specialty medical groups, Independent Physician Associations (IPAs), and other provider entities.
One-on-one dermatologists are unlikely to be able to exercise much influence on the development of P4P programs, particularly since these programs are certain to be developed first with an inpatient focus. So in order to have some skincare-specific input, it’s essential not to sit back and assume that P4P is a problem for other physicians.
Get in touch with the medical director and the director of provider relations at a local health plan, with the chief of services at your hospital, and with the CEO of your IPA. Find out what plan is under consideration by local, regional, or national payers.
Get involved, raise your voice, and contribute expertise so that you don’t end up steamrollered by those bean counters!
Q uality. For more than a decade this has been the hottest buzzword in health care, particularly in managed care. Clinicians, industry think-tank experts, academicians, health plan “bean counters,” and others have produced numerous studies and reports, each with its own definition of quality and how to measure it.
Yet until recently, for all the accumulated “knowledge” gleaned from countless studies, the medical community and healthcare system administrators have never been all that close to agreement. And at the heart of it all is a significant problem — practice variation.
Obviously, styles and methods of care vary from dermatologist to dermatologist. The availability of resources varies, as do techniques and skills. And so across the nation the cost to deliver similar care to a patient differs greatly.
For example, Medicare data indicate that per-capita spending in the Miami area is approximately two-and-a-half times that in Minneapolis even after the data have been “massaged” to account for age, sex and racial factors. Why is that, and does the variation tell us anything about the quality of care in Miami vs. Minneapolis? Most physicians likely would say “no,” while many non-clinicians would say “yes.”
One topic that will be getting more attention in the coming years is Pay for Performance — or, in other words, third-party plans basing reimbursements on individual performance. With more dollars spent each year to pay for increasing numbers of ever more expensive services, it’s clear that a lot of payers (including Medicare) are sinking big dollars into developing compensation systems that would move toward this standard over the next few years.
Avoiding Past Mistakes, Hopefully
Pay for Performance is a topic that’s been kicked around for more than 10 years. But just as in the days before the industry accepted HEDIS (health plan employer data information set) as a set of nationally-recognized measurements and standards, P4P, until recently, has also been very much a loose collection of potentially good proposals and standards that have not come together into a widely accepted, workable plan.
Before HEDIS, every payer was creating its own measuring instrument and standards to self-report self-serving data that made the plan look “better” than its competition. Of course, every health plan claimed its measuring instrument was valid and nobody else’s was as good. This resulted in a lot of confusion and little valid data upon which to make informed healthcare purchasing or access decisions.
And with each plan trying to implement its own measurement and reporting systems, physicians were caught in no-man’s land, having to report data in different formats to different entities. It took many years and many dollars poured down numerous rat holes until the industry came together (under a watchful government eye) to create a set of accepted measurement and reporting standards — today’s HEDIS. These standards, flawed though some may find them, are at least a uniform measure by which to compare health plan to health plan, hospital to hospital, physician group to physician group.
What Does Pay for Performance Really Mean?
The idea behind Pay for Performance is that if physician performance can be accurately measured, categorized, and reported, then health plans will have an objective means by which to pay more to better performing physicians and hospitals, and patients will have an objective means by which to select their providers. As always, the devil is in the details.
Perhaps the greatest fear for physicians regarding P4P systems is that they will have to spend ridiculous amounts of money integrating their practice management software with different payer systems to meet each plan’s particular standards for “performance.” To many, this is looking like another series of forced, unrecoverable expenses — more rat holes just over the horizon. And that concern is compounded by a fear that many of the most critical decisions will be driven by non-physicians who, when it comes to the realities of running a medical practice, just don’t “get it.”
And so, while P4P has promise, it also has the potential to be a huge boondoggle if health plans are left to individually define “quality” performance and then to set the rules for rewarding it.
One dermatologist, Diane Thaler, M.D., who is employed by an HMO in Wisconsin, is skeptical that P4P will benefit physicians.
“The pitfalls are what somebody must talk about,” said Dr. Thaler who has seen many a plan and program come and go in her lengthy career as a dermatologist. “The main questions we need to ask are ‘Who will profit and who might be hurt by this?’” Dr. Thaler explained.
“Many healthcare providers already evaluate performance to the detriment of the patient,” she added. For example, she said, “Many PAs, NPs and doctors have their patients hysterical about cholesterol levels to the exclusion of thinking about anything else. You see chart after chart about patients’ cholesterol levels,” said Dr. Thaler. “Meanwhile, the patient is dying from something else that no one has detected.
“When you start defining endpoints, then that’s what everyone focuses on,” explained Dr. Thaler.
Four Issues to Consider
In order for P4P to have a chance at success, some important issues must be considered. These include the following.
1. Does More Care Equal Better Care?
If P4P is to be successful it must work with HEDIS. Yet by nature there is a fundamental disconnect between HEDIS and Pay for Performance. Certainly as far as the payers are concerned, for HEDIS reporting more care equals or clearly infers better care (for example, raising the number and percentage of members receiving breast or colorectal cancer screenings). But the opposite applies to P4P. The basic premise of P4P is to reward physicians for providing better care rather than more care.
Last Fall, Dartmouth Medical School published the results of several studies. The school’s report directly contradicted the not-uncommon perception that the quality of care rises with the dollars spent and amount of care delivered.
In an Oct. 11, 2004, article on the Web site modernhealthcare.com, John Wenn-berg, the lead researcher and director of the Center for Evaluative Clinical Sciences at Dartmouth said: “It is clear that quality is inversely correlated with the intensity of care and that the better hospitals are using fewer resources and providing fewer hospitalizations and physician visits.”
Payers are on board with the idea of giving incentives to physicians but, at the same time, they want to reduce practice variations. The thinking is that if physicians can be “encouraged” to follow a set of uniform treatment guidelines (to also include Rx prescribing patterns, test orders, etc.), then the resulting happier, healthier patients will demonstrate which physicians are providing the best and most cost-effective care and, therefore, which physicians deserve to receive additional payments based on their clinical outcomes. Again, the devil is in the details.
2. How Much New Administrative “Hassle” Will Result?
One obvious issue is that P4P programs will require the physician to negotiate additional administrative hurdles. That is, there will be more reporting and more paperwork to
substantiate that a physician has met the higher performance levels and is eligible for the payment differentials. So in addition to the standards defining exemplary performance, the reporting mechanism(s) will be crucial to the success of any P4P program.
3. Will Physicians Change Their Behavior?
Another issue sure to stir up discussion and controversy is the idea of trying to modify physician habit and style. Clearly, every physician wants to improve quality. But traditionally, many physicians have been reluctant to participate in quality improvement programs because the programs require the practitioner to modify behavior — yet, to this point, the programs have not benefited them personally. In simplest terms, quality improvement programs of the past have not answered that very basic physician question “What’s in it for me?”
4. Will Tiered Networks Result?
Yet another concern is that some payers have announced intentions to create tiered networks — multiple provider panels that would reward patients for using practitioners deemed more
cost-effective and clinically superior. Aetna’s version, Aexcel, was launched in 2004, with plans to expand it in 2005.
Aetna states it will utilize claims data and a proprietary database to establish this network-within-a-network comprised of those physicians the payer deems the best of the best. According to a July 26, 2004, article on www.amednews.com, Aexcel will start out including cardiologists and cardiothoracic surgeons, gastroenterologists, general surgeons, OB-GYNs, orthopedists, otolaryngologists, neurologists, plastic surgeons, vascular surgeons, and urologists. Principal measurements will include hospital admission rates, total cost of in- and outpatient care, and rates of unexpected, adverse events.
Does this mean that dermatologists are exempt from P4P in the Aexcel system? Initially, perhaps, and that’s most likely because dermatology is not inpatient-oriented. But if P4P proves successful, there’s no reason to doubt that Aetna would try to find a way to apply Aexcel to a specialty that’s more typically focused on outpatient care.
The little twist in Aexcel for physicians is that they would not be paid any more for jumping through all the hoops and being named “superior.” Rather, patients would get incentives (for example, lower deductibles) to use Aetna’s Aexcel physicians rather than the non-Aexcel physicians. That, in theory, would drive more business to the better performers and benefit them financially.
However, for those not deemed “superior” the issue becomes one of suddenly being on the outside looking in — excluded from this specially-promoted sub-set of “elite” practitioners. And that certainly could have a negative effect on patient volume and cash flow.
P4P Standards — One for All and All for One?
The call for uniform P4P standards is starting to resonate loudly across the country. And keenly aware of the mess that had to be cleaned up before HEDIS came to fruition, some in the healthcare industry are looking to Congress to establish those standards.
For many, that’s a frightening thought given Congress’s inability to get much done right and in a timely manner vis-à-vis health care. But it’s also clear to many that this is a big and complicated project, even on a local basis, and Congress may prove to be the only body capable of pulling something together on a nationwide basis.
Absent a powerful, unifying (coercing?) force to convince the various players to participate under one set of rules, physicians would face impossible administrative burdens and associated costs if they were required to comply with a multitude of different programs and reporting standards developed by individual payers and other involved parties. Karen Ignagni, the President and CEO of America’s Health Insurance Plans (formerly AAHP), expressed concern about P4P going off in all sorts of directions. In a June 29, 2004, article in the publication Modern Healthcare, she stated “We have all these silos going up — Leapfrog, individual consulting companies, government agencies, employer groups — all are starting down different paths.”
Reporting Performance Results — Would It Make a Difference?
If as part of a P4P program physicians and other healthcare providers were required to report publicly the results of their performance, and if pay were tied to those results, would that dramatically reduce deaths and costs attributable to lower quality care? “Yes,” says the National Committee for Quality Assurance (NCQA).
In its 2004 annual report, NCQA noted that for calendar year 2003, 79,000 avoidable deaths and $1.8 billion of medical costs were attributable to practice variations. And with premiums rising in excess of 10% for each of the past 4 years, purchasers are paying attention.
Peter Lee, President/CEO of the Pacific Business Group on Health, commented on the NCQA’s numbers in a Sept. 23, 2004, AP News article on excite.com. He said, “This report underscores that all too often we are not getting good value for that (premium) money.” In fact, only about 25% of the population is enrolled in a health plan that reports publicly. The NCQA report also noted that plans that do report performance publicly demonstrate significant improvement in such areas as diabetes care and management, breast cancer screening, and cholesterol management.
Be a Part of the Solution
I recently read the following on an Internet practice management discussion board. An administrator related this troubling account of the practice’s first encounter with an Ohio insurer’s performance-based system.
“Last year [name of plan] did a similar type of evaluation, and those physicians who were grouped in the category that was considered to be less effective in managing costs were going to be significantly penalized.
Patients who chose to go to one of these physicians and had one of the insurance products using these categories to rate physicians would have had a much higher co-pay than if they went to a physician with a better rating from [name of plan]. The claims data they used and the analysis programs were clearly not up to the task, and we spent a fair amount of time fighting this product and this system with managers at [the plan].
For the time being they have admitted there were problems in the analysis software, and have suspended the product and the rating system, but they made it clear it would be rearing its head again. My lesson learned was to take these ratings very seriously and investigate carefully to see what data they are using to make their decisions. We found that [the plan’s] data gathering and analysis were completely misleading and inaccurate.
If you’ve learned nothing else about managed care over the past 20 years you know for certain that you have to watch out for yourself and not leave things to the bean counters.
Depending on how it’s put into action and how it then evolves and adjusts with time and data, P4P has the potential to dramatically change for the better how physicians are compensated, and legitimately reward those who can demonstrate better outcomes, happier patients, and more efficient use of resources. It could also fall flat on its face if not embraced by the physician community.
At this early stage, physicians still have the opportunity to get in on the ground floor and become involved in the development of P4P programs. For dermatologists this will likely mean becoming more closely aligned with non-skincare colleagues who are affiliated with hospitals, multi-specialty medical groups, Independent Physician Associations (IPAs), and other provider entities.
One-on-one dermatologists are unlikely to be able to exercise much influence on the development of P4P programs, particularly since these programs are certain to be developed first with an inpatient focus. So in order to have some skincare-specific input, it’s essential not to sit back and assume that P4P is a problem for other physicians.
Get in touch with the medical director and the director of provider relations at a local health plan, with the chief of services at your hospital, and with the CEO of your IPA. Find out what plan is under consideration by local, regional, or national payers.
Get involved, raise your voice, and contribute expertise so that you don’t end up steamrollered by those bean counters!
Q uality. For more than a decade this has been the hottest buzzword in health care, particularly in managed care. Clinicians, industry think-tank experts, academicians, health plan “bean counters,” and others have produced numerous studies and reports, each with its own definition of quality and how to measure it.
Yet until recently, for all the accumulated “knowledge” gleaned from countless studies, the medical community and healthcare system administrators have never been all that close to agreement. And at the heart of it all is a significant problem — practice variation.
Obviously, styles and methods of care vary from dermatologist to dermatologist. The availability of resources varies, as do techniques and skills. And so across the nation the cost to deliver similar care to a patient differs greatly.
For example, Medicare data indicate that per-capita spending in the Miami area is approximately two-and-a-half times that in Minneapolis even after the data have been “massaged” to account for age, sex and racial factors. Why is that, and does the variation tell us anything about the quality of care in Miami vs. Minneapolis? Most physicians likely would say “no,” while many non-clinicians would say “yes.”
One topic that will be getting more attention in the coming years is Pay for Performance — or, in other words, third-party plans basing reimbursements on individual performance. With more dollars spent each year to pay for increasing numbers of ever more expensive services, it’s clear that a lot of payers (including Medicare) are sinking big dollars into developing compensation systems that would move toward this standard over the next few years.
Avoiding Past Mistakes, Hopefully
Pay for Performance is a topic that’s been kicked around for more than 10 years. But just as in the days before the industry accepted HEDIS (health plan employer data information set) as a set of nationally-recognized measurements and standards, P4P, until recently, has also been very much a loose collection of potentially good proposals and standards that have not come together into a widely accepted, workable plan.
Before HEDIS, every payer was creating its own measuring instrument and standards to self-report self-serving data that made the plan look “better” than its competition. Of course, every health plan claimed its measuring instrument was valid and nobody else’s was as good. This resulted in a lot of confusion and little valid data upon which to make informed healthcare purchasing or access decisions.
And with each plan trying to implement its own measurement and reporting systems, physicians were caught in no-man’s land, having to report data in different formats to different entities. It took many years and many dollars poured down numerous rat holes until the industry came together (under a watchful government eye) to create a set of accepted measurement and reporting standards — today’s HEDIS. These standards, flawed though some may find them, are at least a uniform measure by which to compare health plan to health plan, hospital to hospital, physician group to physician group.
What Does Pay for Performance Really Mean?
The idea behind Pay for Performance is that if physician performance can be accurately measured, categorized, and reported, then health plans will have an objective means by which to pay more to better performing physicians and hospitals, and patients will have an objective means by which to select their providers. As always, the devil is in the details.
Perhaps the greatest fear for physicians regarding P4P systems is that they will have to spend ridiculous amounts of money integrating their practice management software with different payer systems to meet each plan’s particular standards for “performance.” To many, this is looking like another series of forced, unrecoverable expenses — more rat holes just over the horizon. And that concern is compounded by a fear that many of the most critical decisions will be driven by non-physicians who, when it comes to the realities of running a medical practice, just don’t “get it.”
And so, while P4P has promise, it also has the potential to be a huge boondoggle if health plans are left to individually define “quality” performance and then to set the rules for rewarding it.
One dermatologist, Diane Thaler, M.D., who is employed by an HMO in Wisconsin, is skeptical that P4P will benefit physicians.
“The pitfalls are what somebody must talk about,” said Dr. Thaler who has seen many a plan and program come and go in her lengthy career as a dermatologist. “The main questions we need to ask are ‘Who will profit and who might be hurt by this?’” Dr. Thaler explained.
“Many healthcare providers already evaluate performance to the detriment of the patient,” she added. For example, she said, “Many PAs, NPs and doctors have their patients hysterical about cholesterol levels to the exclusion of thinking about anything else. You see chart after chart about patients’ cholesterol levels,” said Dr. Thaler. “Meanwhile, the patient is dying from something else that no one has detected.
“When you start defining endpoints, then that’s what everyone focuses on,” explained Dr. Thaler.
Four Issues to Consider
In order for P4P to have a chance at success, some important issues must be considered. These include the following.
1. Does More Care Equal Better Care?
If P4P is to be successful it must work with HEDIS. Yet by nature there is a fundamental disconnect between HEDIS and Pay for Performance. Certainly as far as the payers are concerned, for HEDIS reporting more care equals or clearly infers better care (for example, raising the number and percentage of members receiving breast or colorectal cancer screenings). But the opposite applies to P4P. The basic premise of P4P is to reward physicians for providing better care rather than more care.
Last Fall, Dartmouth Medical School published the results of several studies. The school’s report directly contradicted the not-uncommon perception that the quality of care rises with the dollars spent and amount of care delivered.
In an Oct. 11, 2004, article on the Web site modernhealthcare.com, John Wenn-berg, the lead researcher and director of the Center for Evaluative Clinical Sciences at Dartmouth said: “It is clear that quality is inversely correlated with the intensity of care and that the better hospitals are using fewer resources and providing fewer hospitalizations and physician visits.”
Payers are on board with the idea of giving incentives to physicians but, at the same time, they want to reduce practice variations. The thinking is that if physicians can be “encouraged” to follow a set of uniform treatment guidelines (to also include Rx prescribing patterns, test orders, etc.), then the resulting happier, healthier patients will demonstrate which physicians are providing the best and most cost-effective care and, therefore, which physicians deserve to receive additional payments based on their clinical outcomes. Again, the devil is in the details.
2. How Much New Administrative “Hassle” Will Result?
One obvious issue is that P4P programs will require the physician to negotiate additional administrative hurdles. That is, there will be more reporting and more paperwork to
substantiate that a physician has met the higher performance levels and is eligible for the payment differentials. So in addition to the standards defining exemplary performance, the reporting mechanism(s) will be crucial to the success of any P4P program.
3. Will Physicians Change Their Behavior?
Another issue sure to stir up discussion and controversy is the idea of trying to modify physician habit and style. Clearly, every physician wants to improve quality. But traditionally, many physicians have been reluctant to participate in quality improvement programs because the programs require the practitioner to modify behavior — yet, to this point, the programs have not benefited them personally. In simplest terms, quality improvement programs of the past have not answered that very basic physician question “What’s in it for me?”
4. Will Tiered Networks Result?
Yet another concern is that some payers have announced intentions to create tiered networks — multiple provider panels that would reward patients for using practitioners deemed more
cost-effective and clinically superior. Aetna’s version, Aexcel, was launched in 2004, with plans to expand it in 2005.
Aetna states it will utilize claims data and a proprietary database to establish this network-within-a-network comprised of those physicians the payer deems the best of the best. According to a July 26, 2004, article on www.amednews.com, Aexcel will start out including cardiologists and cardiothoracic surgeons, gastroenterologists, general surgeons, OB-GYNs, orthopedists, otolaryngologists, neurologists, plastic surgeons, vascular surgeons, and urologists. Principal measurements will include hospital admission rates, total cost of in- and outpatient care, and rates of unexpected, adverse events.
Does this mean that dermatologists are exempt from P4P in the Aexcel system? Initially, perhaps, and that’s most likely because dermatology is not inpatient-oriented. But if P4P proves successful, there’s no reason to doubt that Aetna would try to find a way to apply Aexcel to a specialty that’s more typically focused on outpatient care.
The little twist in Aexcel for physicians is that they would not be paid any more for jumping through all the hoops and being named “superior.” Rather, patients would get incentives (for example, lower deductibles) to use Aetna’s Aexcel physicians rather than the non-Aexcel physicians. That, in theory, would drive more business to the better performers and benefit them financially.
However, for those not deemed “superior” the issue becomes one of suddenly being on the outside looking in — excluded from this specially-promoted sub-set of “elite” practitioners. And that certainly could have a negative effect on patient volume and cash flow.
P4P Standards — One for All and All for One?
The call for uniform P4P standards is starting to resonate loudly across the country. And keenly aware of the mess that had to be cleaned up before HEDIS came to fruition, some in the healthcare industry are looking to Congress to establish those standards.
For many, that’s a frightening thought given Congress’s inability to get much done right and in a timely manner vis-à-vis health care. But it’s also clear to many that this is a big and complicated project, even on a local basis, and Congress may prove to be the only body capable of pulling something together on a nationwide basis.
Absent a powerful, unifying (coercing?) force to convince the various players to participate under one set of rules, physicians would face impossible administrative burdens and associated costs if they were required to comply with a multitude of different programs and reporting standards developed by individual payers and other involved parties. Karen Ignagni, the President and CEO of America’s Health Insurance Plans (formerly AAHP), expressed concern about P4P going off in all sorts of directions. In a June 29, 2004, article in the publication Modern Healthcare, she stated “We have all these silos going up — Leapfrog, individual consulting companies, government agencies, employer groups — all are starting down different paths.”
Reporting Performance Results — Would It Make a Difference?
If as part of a P4P program physicians and other healthcare providers were required to report publicly the results of their performance, and if pay were tied to those results, would that dramatically reduce deaths and costs attributable to lower quality care? “Yes,” says the National Committee for Quality Assurance (NCQA).
In its 2004 annual report, NCQA noted that for calendar year 2003, 79,000 avoidable deaths and $1.8 billion of medical costs were attributable to practice variations. And with premiums rising in excess of 10% for each of the past 4 years, purchasers are paying attention.
Peter Lee, President/CEO of the Pacific Business Group on Health, commented on the NCQA’s numbers in a Sept. 23, 2004, AP News article on excite.com. He said, “This report underscores that all too often we are not getting good value for that (premium) money.” In fact, only about 25% of the population is enrolled in a health plan that reports publicly. The NCQA report also noted that plans that do report performance publicly demonstrate significant improvement in such areas as diabetes care and management, breast cancer screening, and cholesterol management.
Be a Part of the Solution
I recently read the following on an Internet practice management discussion board. An administrator related this troubling account of the practice’s first encounter with an Ohio insurer’s performance-based system.
“Last year [name of plan] did a similar type of evaluation, and those physicians who were grouped in the category that was considered to be less effective in managing costs were going to be significantly penalized.
Patients who chose to go to one of these physicians and had one of the insurance products using these categories to rate physicians would have had a much higher co-pay than if they went to a physician with a better rating from [name of plan]. The claims data they used and the analysis programs were clearly not up to the task, and we spent a fair amount of time fighting this product and this system with managers at [the plan].
For the time being they have admitted there were problems in the analysis software, and have suspended the product and the rating system, but they made it clear it would be rearing its head again. My lesson learned was to take these ratings very seriously and investigate carefully to see what data they are using to make their decisions. We found that [the plan’s] data gathering and analysis were completely misleading and inaccurate.
If you’ve learned nothing else about managed care over the past 20 years you know for certain that you have to watch out for yourself and not leave things to the bean counters.
Depending on how it’s put into action and how it then evolves and adjusts with time and data, P4P has the potential to dramatically change for the better how physicians are compensated, and legitimately reward those who can demonstrate better outcomes, happier patients, and more efficient use of resources. It could also fall flat on its face if not embraced by the physician community.
At this early stage, physicians still have the opportunity to get in on the ground floor and become involved in the development of P4P programs. For dermatologists this will likely mean becoming more closely aligned with non-skincare colleagues who are affiliated with hospitals, multi-specialty medical groups, Independent Physician Associations (IPAs), and other provider entities.
One-on-one dermatologists are unlikely to be able to exercise much influence on the development of P4P programs, particularly since these programs are certain to be developed first with an inpatient focus. So in order to have some skincare-specific input, it’s essential not to sit back and assume that P4P is a problem for other physicians.
Get in touch with the medical director and the director of provider relations at a local health plan, with the chief of services at your hospital, and with the CEO of your IPA. Find out what plan is under consideration by local, regional, or national payers.
Get involved, raise your voice, and contribute expertise so that you don’t end up steamrollered by those bean counters!
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October 2024
Volume 32
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