Pay-for-Performance: A Decision Guide for Purchasers

1. Pay-for-Performance: A Decision Guide for Purchasers Guide Prepared for: Agency for HealthCare Research and Quality U.S. Department of Health and Human Services Prepared by: R. Adams Dudley, M.D., M.B.A. University of California San Francisco Meredith B. Rosenthal, Ph.D. Harvard School of Public Health

2. Pay for Performance:A Decision Guide for Purchasers Electronic Copy of Guide and other AHRQ P4P Resources: http://www.ahrq.gov/qual/pay4per.htm

3. Overview • Not a users manual: too little data • Addresses: • Developing an overall strategy • Incentive design and measures selection • Implementation • Evaluation and revision

4. Is Our Community Ready? • Do we know what we are trying to accomplish? • Do we have enough influence? • Are the providers ready?

5. Strategic Issues: Getting Started • Voluntary vs. mandatory: • Voluntary: easier, may only attract high-performing providers • Mandatory (i.e., written into all contracts): creates uniform incentives, but may need high market share • Bonus program is in between: “mandatory”, but providers are free to ignore it • Phasing in: start with volunteers, or “pay for participation”/“pay for reporting”

6. Strategic Issues: Getting Started • Which providers to target?: • Hospitals and/or physicians • Large vs. individual/small group • Contribution of hospitals vs. physicians to quality and cost varies from region to region • Measurement issues favor larger groups but incentives may be stronger for individuals • System view of quality improvement suggests higher level • Choose the provider target for which you can get the biggest bang for your buck

7. Increasing Inclusion of Specialists and Hospitals in Pay-for-Performance

8. Choosing Measures • National measure sets should be considered first • Tested • Accepted • Already being collected • Some sources: AHRQ (Inpatient Quality Indicators), National Quality Forum, Hospital Quality Alliance, Ambulatory Care Quality Alliance, NCQA, Leapfrog Group

9. Incentive Design Challenges • All P4P programs are not the same • Design choices matter • First critical question is orientation: • Quality improvement across all providers, patients? • Rewards for the best only? E.g., Premier Inc./CMS demonstration

10. Explicitly or Implicitly Rewarding Quality Improvement • P4P programs that reward top group (e.g., 20%) or set a benchmark for reward that all must meet do not uniformly encourage improvement • These features should result in more QI: • Rewarding improvement explicitly (i.e. change rather than/in addition to level) • Multiple levels of rewards (partial credit) • Payments tied to each patient treated well

11. Case Example: Hudson Health Plan: Rewarding Quality Diabetes Management

12. Key Design Issues: How Much Money? • To be effective, bonus should be commensurate with cost of effort • Little good information about what it takes to reach quality targets • Most P4P programs for physicians 5-10% of associated fees; hospitals 1-2%

13. Planning Ahead for Evaluation • You spent all that time and money…shouldn’t you assess what you accomplished? • Aspects of implementation can facilitate evaluation • Collecting data during a measurement (i.e. non-payment) year will allow before/after comparison • Implementing P4P for some providers before others may create a natural comparison group

14. What Types of Effects to Look For • Data collection should not only track intended consequences but also monitor potential side effects: • Patient selection/dumping (changes in case-mix, excessive switching) • Diversion of attention away from other important aspects of care • Widening gaps in performance between best and worst

15. Summary • Pay-for-performance can facilitate improved patient care, cost-efficiency • Best practices still unknown • Careful matching of goals and mechanisms will most likely lead to best results • In light of uncertainties about design, evaluation is key