American College of Physicians: Internal Medicine — Doctors for Adults ®

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Is P4P the next great idea or a passing fad?

From the May ACP Observer, copyright 2007 by the American College of Physicians.

Just as Medicare is about to launch its first foray into physician pay-for-performance (P4P) starting in July, critics are questioning whether paying doctors for reporting on quality measures will do any good.

Researchers are finding that the evidence on the impact of P4P in the private sector programs on improving outcomes and reducing costs is weak at best. The Congressional Research Service, the independent and non-partisan research arm of Congress, recently concluded that a Medicare P4P program is not likely to produce substantial cost savings.

Within Congress, support for Medicare P4P has eroded with the ascension of skeptical Democrats into leadership positions, replacing a Republican leadership that had latched onto P4P as key strategy for introducing transparency in health care decision-making, improving outcomes and reducing costs. One prominent critic within organized medicine has gone so far as to label P4P a passing fad.

But just as it was premature for proponents to make exaggerated and unsubstantiated claims about the impact of P4P on quality and cost, it is also too soon for the critics to conclude that paying doctors for achieving quality improvements is unworkable.

P4P today

Rather than being either the next great idea or a passing fad, P4P today can be described as a difficult, complex and new effort to measure the quality and cost of care provided by physicians and to pay them accordingly. It is driven principally by employers and the government's desire to get more value for their health benefits dollars, and by physicians who believe that performance measure is essential to quality improvement.

Because it is still very much in its infancy, there have been too few programs, too few covered lives, too few real world experiences and too little hard data to know for sure what works and what doesn't. New research is beginning to inform decisions on P4P, however.

A study published in the March 15 issue of the Journal of the American Medical Association found that data on care patterns for Medicare patients—how many physicians does the typical patient see during the year?—undermines two principal assumptions that underpin the implementation of P4P in Medicare. The first assumption was that patients can be assigned to a physician or a practice that will have primary responsibility for their care. The second assumption was that a meaningful fraction of the care physicians deliver is for patients for whom they have primary responsibility.

Instead, the authors found that, "The dispersion of patients' care among multiple physicians will limit the effectiveness of pay-for-performance initiatives that rely on a single retrospective method of assigning responsibility for patient care." They reached this conclusion based on data that show that "in a single year, the typical beneficiary saw a median of two primary care physicians and five specialists, collectively working in four different practices."

These data suggest that Medicare's new pay-for-performance program for physicians, the Physicians Quality Reporting Initiative (PQRI), may be of limited effectiveness.

The PQRI was created by the Health and Tax Relief Act of 2006. The law specifies that the new program will be implemented by CMS on July 1 and continue through Dec. 31. Under the program, physicians who voluntarily agree to submit data on at least three quality measures applicable to their patients will be eligible for an additional 1.5% Medicare payment bonus, to be paid out in a lump sum in the first quarter of 2008. CMS has yet to provide detailed information on the new program, but preliminary information—including the initial set of quality measures—can be found on the PQRI Web site.

Because the PQRI does not correct the dispersion of care found in the JAMA study, it will have less of an impact on improving quality and reducing costs than alternative reforms that would organize care around a single physician and practice that accepts responsibility for the patient's whole health.

Redesigning around a medical home

ACP's concept of a patient-centered medical home (PCMH) would reduce dispersion and fragmentation of care by creating incentives for beneficiaries to receive care from a personal physician who coordinates and integrates care across sites of service and medical disciplines, supported by a payment structure that recognizes the value of that relationship and the practice-level systems needed to coordinate care effectively Performance-based payments within a PCMH are likely to be far more effective in improving quality and lowering costs than imposing a Medicare P4P program on a dispersed and fragmented care system.

The PQRI would be more effective if it was revamped to provide positive financial incentives for physicians to acquire the tools and health information technologies needed to coordinate care for patients with multiple chronic illnesses in a medical home. This could be done, for instance, by paying them a bonus for having in place a patient registry system to track patients by disease condition and for having evidence-based clinical decision support at the point of care.

The pressure by employers, the federal government and consumers for greater transparency in health care decision-making—and for more value for the money being spent—will not wane. Paying physicians at least in part on how well they do in achieving measurable improvements will remain a component of value-based purchasing.

At the same time, P4P should be viewed with healthy skepticism. Congress, Medicare and employers should support models that directly address the dispersion and fragmentation of care that contribute to poorer outcomes. The should rethink P4P so that it is incorporated into a comprehensive effort to reform physician payments to support care by a personal physician in a patient-centered practice that serves as a patient's medical home, rather than paying doctors on a piecemeal basis for measures layered on a fragmented and dispersed health care system.

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