

Health Plans Offer Financial Rewards for Higher Quality Care
Physicians and Hospitals Receptive but Wary of Tying Pay to Performance
News Releases
May 13, 2004
FURTHER INFORMATION, CONTACT:
Alwyn Cassil: (202) 264-3484
ASHINGTON, D.C.Health plans increasingly are dangling
a carrothigher paymentsto get physicians and hospitals
to improve patient care, according to a study released today by the Center for
Studying Health System Change (HSC).
"Pay-for-performance initiatives are just getting off the ground in most
communities, but they can provide a springboard for broader acceptance of tying
physician and hospital payments to quality improvement," said Paul B. Ginsburg,
Ph.D., president of HSC, a nonpartisan policy research organization funded principally
by The Robert Wood Johnson Foundation.
The studys findings are detailed in a new HSC Issue BriefPaying
for Quality: Health Plans Try Carrots Instead of Sticks. The study is based
on HSCs 2002-03 site visits to 12 nationally representative communities: Boston;
Cleveland; Greenville, S.C.; Indianapolis; Lansing, Mich.; Little Rock, Ark.;
Miami; northern New Jersey; Orange County, Calif.; Phoenix; Seattle; and Syracuse,
N.Y.
"Health plan-based quality incentive programs exist in seven of the 12
HSC communities, and most programs are sponsored by major health plansthose
with large market share and, therefore, significant influence over providers,"
said HSC Research Analyst Bradley C. Strunk, coauthor of the study with Robert
E. Hurley, Ph.D., an HSC consulting researcher from Virginia Commonwealth University.
Two landmark Institute of Medicine reportsTo Err Is Human in 1999
and Crossing the Quality Chasm in 2001drew attention to significant
quality and patient-safety shortcomings in the American health care system.
A key recommendation in Crossing the Quality Chasm was to align payment policies
with quality improvement. Quality incentive programs across the HSC communities
varied on three key design features: quality measurement, incentive payment
structure and incentive size:
- While plans use different methods to measure quality with little standardization,
commonly used indicators include patient satisfaction and preventive care use,
since this information can be collected easily. Use of more sophisticated outcome
and process measures, such as the specific care a patient receives, is less
common.
- Incentive payments can take a variety of forms but almost always represent
"upside" risk to providers. In other words, the providers risk losing
a bonus, but base payment rates are not threatened.
- Incentive payments typically are modest compared with a providers
total revenue from a health planusually about 1 percent to 5 percent
of total payments.
Interviews with plans, providers and purchasers suggest that plans have been
the prime movers behind quality incentives in the 12 communities, and many of
the programs focus on promoting the practice of evidence-based medicine. Other
key study findings include:
- Quality incentives also are attractive to plans for other reasons.
During the past few years, providers in many markets have sought to shed capitated
payments, under which they received fixed monthly payments for patients, and
return to payment models such as fee-for-service that involve little or no financial
risk and can create incentives for overuse of services. Some plans view quality
incentives as preserving some financial risk for providers in a more acceptable
way than capitation.
- With a few exceptions, providers have not been driving forces behind
quality incentives, and many remain cautious about incentive program designs
and measures. But some are willing to participate and, like plans, view quality
incentives as a way to promote the practice of evidence-based medicine.
- Plans and providers are still experimenting with quality-based financial
incentives. Over the longer term, the success of these programs will be judged
by their ability to attract greater provider and plan participation and alter
provider behavior in a way that promotes system-wide quality improvement.
- Continuing public support for evidence-based effectiveness research
and clinical guideline development will be critical to advancing best clinical
practices, devising more sophisticated tools to measure quality and attracting
providers to the cause of quality improvement. Investment in information technology
will be equally important to enable better data collection and analysis and
to promote the widespread adoption of evidence-based practice.
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The Center for Studying Health System Change is a nonpartisan policy research
organization committed to providing objective and timely research on the nations
changing health system to help inform policy makers and contribute to better
health care policy. HSC, based in Washington, D.C., is funded principally by
The Robert Wood Johnson Foundation and is affiliated with Mathematica Policy
Research, Inc.
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