Key Point

Pay-for-performance initiatives, or value-based payments, are on track to change the way the health care community is reimbursed by the federal government.

HONOLULU—A recent initiative developed by the Centers for Medicare and Medicaid Services (CMS) in collaboration with other agencies and organizations aims to reduce US health care costs while improving quality of care, said Daniel L. Herr, MD, at the Society of Critical Care Medicine’s 37th Critical Care Congress. In the coming years, this initiative—informally known as pay for performance (P4P)—will result in a transformation of the relationship between the federal government and medical providers, as health care reimbursements will depend solely on the quality of care given to patients, explained Dr. Herr, who is Medical Director of the Surgical ICU at Washington Hospital Center in Washington, DC.

By instituting a nationwide P4P program called the Physician Quality Reporting Initiative (PQRI), CMS intends to avoid the potentially serious consequences of rising health care costs, which now represent almost 20 cents of every government dollar spent. In its present form, PQRI involves increased reimbursement to health care providers who report quality and/or efficiency measures that have been set forth by AQA (formerly known as the Ambulatory Care Quality Alliance), a large coalition of government, health care, physician, and consumer organizations. These performance measures focus on health care process, outcomes, structure, and patient satisfaction.

However, the focus will soon shift away from payment incentives for better performance and instead center on nonpayment when performance does not meet the standards set by PQRI measures, Dr. Herr warned. This projected change stems from the CMS goal to transform Medicare from a passive, relatively unquestioning payer into an active purchaser. Once that happens, health care providers will have to prove to the government they are worthy of Medicare reimbursement, explained Dr. Herr, who is a member of the American Medical Association’s Physician Consortium for Performance Improvement.

A crucial concept behind this approach is value-based purchasing, which in this case means getting the highest level of quality care for a particular price, said Dr. Herr. An example of value-based purchasing will be realized in November 2008, when hospitals will not be reimbursed for bloodstream infections, urinary tract infections, bedsores, or mediastinitis after coronary artery bypass graft surgery, because these conditions might suggest a failure on the provider’s part. Instead, hospitals will be paid only for the positive results they deliver to their patients.

The patient care would need to be “active, efficient, safe, equitable, patient-centered, and timely” in order to meet the performance measure standards for reimbursement, Dr. Herr pointed out. In order to meet statutory requirements, these performance measures will be subject to the following mandates:

Some preliminary studies have confirmed that P4P is becoming increasingly common and have shown some indication that it works. In a study by Mehrotra et al, 89% of leaders of physician groups delivering primary care in Massachusetts reported P4P incentives in at least one commercial health plan contract.

P4P incentives that were tied to Health Employer Data and Information Set quality measures showed a positive association with quality improvement initiatives (odds ratio, 1.6), the researchers found. Also, 36% of physician group leaders using P4P incentives reported that the incentives were “very important” or “moderately important” to their group’s financial success.

In another paper, Margaret O’Kane, President and founder of the National Committee for Quality Assurance in Washington, DC, described several reasonably successful P4P initiatives, such as Bridges to Excellence and the P4P program sponsored by the Integrated Healthcare Association in Oakland, California.

Although she acknowledged that the return on investment in P4P initiatives is not yet known, Ms. O’Kane stated, “The initial data from developmental P4P programs across the nation have indicated that both financial and nonfinancial incentives motivate significant change in health care delivery.”

Without a program such as P4P, Medicare may “go bust,” Dr. Herr suggested. However, he also said that once P4P is widespread, health care providers who do not measure up to its quality standards may find themselves “out of business.”

—Timothy Begany

Suggested Reading
Mehrotra A, Pearson SD, Coltin KL, et al. The response of physician groups to P4P incentives. Am J Manag Care. 2007;13(5):249-255.
O’Kane ME. Performance-based measures: the early results are in. J Manag Care Pharm. 2007;13(2 Suppl B):S3-S6.

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