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Market forces now pushing pay-for-performance

College takes leading role to make sure physicians help craft national standards

From the May ACP Observer, copyright 2005 by the American College of Physicians.

Faced with skyrocketing health care costs and uneven quality, employers, health plans and consumers across the country are demanding more value for their health care dollar. To counteract spiraling expenditures and ensure better quality, pay-for-performance programs—where doctors get financial incentives to meet certain quality standards—are proliferating.

For physicians, it is no longer a question of whether they will be asked to participate in such programs, but when and how many. In response to the growing demand, a national consortium of large employers, public and private payers, and physician groups began meeting last year to formulate a strategy for nationwide ambulatory performance measurement and reporting. The goal of this Ambulatory Care Quality Alliance (ACQA) is to provide evidence-based guidelines vetted by leading medical organizations, quality groups, purchasers and health plans for the many incentive programs already planned or in operation.

The College is playing a leading role in ACQA, which may announce a "starter set" of agreed-upon performance measures as early as next month.

"Physicians know best how practice is delivered and are in the best position to develop evidence-based clinical guidelines," said John Tooker, FACP, the College's chief executive officer and a key ACQA participant. "ACP is uniquely positioned to represent physicians' interests because of our expertise in quality improvement and the policies we've developed to inform the national debate on performance measures."

The rationale behind a measurement starter set is to allow physicians to get used to tracking a few simple performance goals while more sophisticated measurements and implementation guidelines are developed, said Kevin B. Weiss, FACP, chair of ACQA's subcommittee on performance measures. While the College and other medical groups would prefer to take an evidence-based approach by waiting for results from pay-for-performance pilots and demonstrations, he said, the market won't wait.

"Purchasers are already going with pay-for-performance," said Dr. Weiss, who is also professor of medicine at Northwestern University's Feinberg School of Medicine in Chicago, director of the Midwest Center for Health Services & Policy Research at Hines VA Hospital in Hines, Ill., and Chair of ACP's Performance Measures Subcommittee. "The College has to take a leadership role in stewarding this process because this is already part of what's happening in practice today."

What's fair in measuring care?

The top item on ACQA'S agenda is to see if they can reach consensus on between 15 to 20 performance measures by next month. The measures under consideration are a subset of a larger group being reviewed by the National Quality Forum (NQF), a nonprofit public-private partnership charged by a presidential advisory commission to develop consensus-based national health care quality measurement standards. (For a look at the proposed starter set, see The ACQA 'starter set': What measures are being proposed?)

Once the NQF approves the starter set, experts expect that health plans and other purchasers will begin incorporating it into their incentive programs as early as next year. Small practices may also adopt the measures for internal benchmarking, Dr. Weiss said.

The ACQA's initial measures will likely be very basic and easy to track from administrative claims data. In addition, said Dr. Weiss, those measures will be evidence-based, a key concern of many physicians worried about the clinical relevancy of incentive-based measures.

The starter set will focus on testing and screening—with what are known as process measures—instead of outcomes, said William E. Golden, FACP, professor of medicine at the University of Arkansas for Medical Science in Little Rock, Ark., and the outgoing chair of the NQF's research and quality improvement council. "We're talking about things like whether a diabetic patient had a lipid profile or hemoglobin A1c test in the past 18 months," he said, "as opposed to whether someone's LDL got to under 100."

Problems arise when more sophisticated care measures are considered, said Dr. Golden, a College Regent. While gleaning evidence of testing and screening is relatively easy using claims data, patient charts give a more nuanced picture of care. However, he added, using charts involves more manual labor to extract data, especially in offices without electronic medical record (EMR) systems.

Adjusting for variables—in patient populations, as well as in different patients' prescription drug coverage, education and comorbidities—also raises enormous hurdles. "All sorts of barriers start to come up that can interfere with the physician's ability to patrol someone's cholesterol or diabetes," said Dr. Golden. "We don't want to create perverse incentives where doctors are motivated to eliminate patients from their practices because they have an impact on their profile."

So, would doctors be penalized for treating sicker patients? According to Dr. Golden, there are ways to adjust for risk.

For example, in the United Kingdom—which has an elaborate pay-for-performance program and is now launching a nationwide EMR system—physicians can flag very sick or noncompliant patients to be removed from their patient base for reporting purposes. Those patients remain in the practice, said Dr. Golden, but don't affect the physician's performance profile.

And physicians' case mix has less of an effect on the results of process measures—such as those the ACQA is now considering—than on outcome measures, Dr. Weiss said. However, he cautioned that "at some point in the future, health outcomes will become more important, which is ultimately what we're all after."

The pay-for-performance landscape

Regardless of whether ACQA approves a starter set of measures in June, purchasers and plans are moving ahead with their own programs. Most groups engaged in pay-for-performance are already using many of the measures under ACQA consideration, and see the ACQA process as a way to get physicians on board.

"Our program started almost 10 years ago in our HMO and three years ago in our PPO, so we're pretty far along," said Michael J. Belman, FACP, staff vice president and medical director for Wellpoint Blue Cross of California.

Despite the longevity of Wellpoint's plan, Dr. Belman said, ACQA's measures would offer one major advantage: standardization. "We don't want to come up with unusual measures that are specific to us. We would prefer to use measures that have been well-vetted and accepted by the medical community."

Already, large private-sector programs have been launched around the country. For example, a pay-for-performance plan coordinated by California's Integrated Healthcare Association (IHA), a nonprofit consortium of medical groups, health plans and health systems, distributed $50 million in bonuses last year. (See "Pay-for-performance takes off in California" from the January-February ACP Observer.)

And a program sponsored by Bridges to Excellence, a nonprofit group of large employers, providers and plans, has expanded to 10 states since its inception two years ago, according to the group's Web site. According to Bridges to Excellence—which partners with the National Committee for Quality Assurance (NCQA), a nonprofit accreditation and certification group—more than 80 other pay-for-performance programs have sprung up nationwide.

The Centers for Medicare and Medicaid Services (CMS), another ACQA participant, is also keen on pay-for-performance. Its three-year Care Management Performance Demonstration program, now under development, will give bonuses to physicians in small and medium-size practices who improve outcomes for chronically ill patients by using health information technology. The CMS also launched a Physician Group Practice Demonstration program to reward physicians in larger group practices for improving quality and efficiency.

At Wellpoint Blue Cross of California's HMO, which participates in the IHA program, medical groups and independent practice associations earn an average annual bonus equal to 5% of their professional compensation, with top performing groups earning 10% or more, according to Dr. Belman.

"Our data say that 5%-10% of one's compensation is probably sufficient to capture physicians' attention or influence their behavior," said Dr. Belman, who also sits on the College's Performance Measures Subcommittee. While his plan's incentive program rewards medical groups rather than individual practitioners, he said that 10% of a group's score is based on whether the group has an internal program to measure and reward individual performance.

While individual motivations may vary somewhat, many employers view pay-for-performance programs as a long-term investment, said Chris Queram, chief executive officer of the Employer Health Care Alliance Cooperative in Madison, Wis., which has 160 employer-members.

Several years ago, for example, the alliance distributed $750,000 to area hospitals and clinics to help them install automated pharmacy dispensing and order entry systems. The employer-owned and -directed nonprofit health cooperative is also piloting performance-based financial reimbursements with its health care partners, including several hospitals and a multispecialty medical group. Such investments and initiatives, Mr. Queram said, are needed to create "either the infrastructure or the capacity to improve."

Ultimately, the goal of performance measures and associated investments is to transform a health care system that has skyrocketing costs and creates significant strains for health care purchasers, said Mr. Queram, an ACQA member. "There is no question that all employers, including large and small corporations, are looking for ways to link the new measurement tools to how they purchase and consume health care services."

Data and information technology

At the same time, ACQA's starter set of measures is being billed as just that: the first of what may prove to be several generations of increasingly sophisticated performance measurement sets.

ACQA is designing the starter set to accommodate small practices that may not have EMRs, said Dr. Tooker, who added that ACQA members are discussing ways to help small practices acquire information systems. ACP continues to focus many of its advocacy efforts on establishing technology investment mechanisms for physicians, while some health plans that have launched pay-for-performance programs are giving medical groups incentives to invest in EMRs.

"That type of investment is going to be needed for the types of measurements that may be rolled out over the next few years," Dr. Tooker continued.

Those other types of measures include outcomes measures, which would require data from patient charts; structural measures, which would assess an office's capacity to deliver promised care; efficiency measures, to gauge a physician's ability to deliver quality at the best cost; and patient experience measures, which would rely on patient survey results. A small practice trying to report on these measures without EMRs, Dr. Tooker said, would find its administrative resources severely taxed.

Besides designing more sophisticated measurements, ACQA faces other major challenges including how data will be collected, stored and used. Possible scenarios include having health plans or independent groups collect data regionally—or having one central, national data repository that an independent or nonprofit organization would steward. According to Dr. Weiss, Medicare may create its own data repository.

Assigning data aggregation to an outside organization makes sense, said Dr. Belman of Wellpoint, which uses the NCQA as its aggregator for the IHA-related HMO program. "Third party is clearly the way to go rather than individual health plans," he said. "It helps in terms of impartiality and creates a greater sense of trust and confidence in the accuracy and validity of the data."

Even discussing how data should be collected and aggregated leads to even bigger questions: Should data be in the public domain or should it be considered the property of health plans, insurers or self-funded employers? And should reporting data be voluntary or mandatory?

"The participants are beginning to seriously address the complex issues associated with creating the infrastructure for performance reporting, and that involves drafting some very important policy and design principles," said Mr. Queram in Wisconsin. "The ACQA process has the potential to contribute to establishing a framework for use at a state and regional level."

The impact on internal medicine?

It is still unclear how much internists stand to gain financially from pay-for-performance. Some programs, such as the California initiative, are providing meaningful incentives, while others offer only nominal rewards.

In the United Kingdom, physicians can make about $70,000 a year in performance-based incentives, Dr. Tooker noted, but here, no such dollars are on the table right now. (For more on pay-for-performance in the United Kingdom, see the Sept. 30, 2004 New England Journal of Medicine.)

"Many people in the United States, both in political and business leadership, feel there are inefficiencies in the system now, so are hesitating to put more money into it," Dr. Weiss said. While some purchasers and plans are putting additional funds into pilot programs, he added, that new money may disappear once those programs end and pay-for-performance mechanisms are folded into existing reimbursement.

The long-term picture could be brighter, however, if the new focus on incentive-based pay leads to an overhaul of the current payment system. Performance-measure advocates point out that pay-for-performance, which targets outcomes and efficiency, may replace fee-for-service, with its emphasis on the number of services provided.

Even without financial incentives, performance measurement forces physicians to focus on quality improvement, which can only enhance patient care, Dr. Weiss said. While this alone won't transform the health care system, he said, it is a necessary first step.

"There is every reason for the physician community to be highly concerned about performance measurement," Dr. Weiss said, "but it has to be seen as one part of a solution, along with payment incentives, better health information technology and more open flow of information." While no one believes performance measurement is the magic bullet that will transform health care quality, he added, "it is one essential piece."

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