Quality and Incentives: Value-Based Purchasing, Pay for Performance and

Transparency

Tom WilliamsExecutive Director

Integrated Healthcare Association

The Quality Colloquium

August 20, 2008

National Leadership• HHS Secretary Leavitt inspired

Executive Order 13410• Four cornerstone goals

- Interoperable Health IT- Transparency of Quality Measurements- Transparency of Pricing Information- Promoting Quality & Efficiency of Care

• Ultimate Goal: “A Change in Culture”

3

Source: The New Yorker, March 17, 2008

IHA Sponsored California Pay for Performance (P4P) Program

Health Plans:• Aetna• Blue Cross• Blue Shield • Western Health

Advantage

Medical Group and IPAs:• 230 groups • 35,000 physicians

* Kaiser participates in the public reporting only

12 million HMO commercial enrollees

• CIGNA• Health Net of CA• Kaiser*• Pacificare/United

4

5

California Pay for Performance: Summary of Performance Results• Clinical: continued modest improvement on most

measures − 5.1 to 12.4 percentage point increases since inception of

measure• Patient experience: scores remain stable but show no

improvement• IT-Enabled Systemness: most IT measures are improving

− Almost two-thirds of physician groups demonstrated some IT capability

− Almost one-third of physician groups demonstrated robust care management processes

Continued performance improvements but

“breakthrough” point not achieved yet.

6

Lesson• Wide variation

across regions exists; contributes to overall “mediocre” statewide performance

• Big gains possible with focused attention on certain regions

P4P Response• Pay for and

recognize improvement (20% of payment for 2007)

• More fundamental change in calculus of payment for improvement for 2008/09

California Pay for Performance:Regional Variability in Quality

7

California Pay for Performance: Clinical Performance Variation

505560657075808590

Inland EmpireLos AngelesCentral CoastCentral ValleySan DiegoOrange CountyBay AreaSacramento/NorthStatewide

MY 2006 Results by Region

Top Performing Groups

California Pay for Performance:A Tale of Two Regions

Inland Empire Bay Area

PCPs/100K Pop. 53 116

% Pop. Medi-Cal 17% 12%

% Hispanic 43% 21%

Per Capita Income $ 21,733 $ 39,048

60

65

70

75

80

85

90

Inland Empire Bay Area

All Groups

Top PerformingGroups

P4P

Perf

orm

ance

Sco

re

Clinical Performance

California Pay for Performance:A Tale of Two Regions

Are Quality Variations Correlated with Physician Reimbursement Disparities?

The data and subjective experience suggest:

Physicians in geographies with low socioeconomics receive disproportionately lower reimbursement across their practice, resulting in diminished physician and organizational capacity, reducing both access and quality of healthcare, even in a uniformly, well-insured population.

P4P Quality Payment Incentives• Fundamental reimbursement disparities

appear to be the main culprit; however P4P should at a minimum not increase reimbursement disparities

• Payment for absolute and relative performance should be balanced with payment for improvement

Paying for Improvement

Survey Response: What % of total bonus payments by health plans should be allocated to improvement vs. relative performance? (n=200, IHA Stakeholders meeting, 10/4/07)

Paying for Performance & Improvement

Earning Quality Points ExampleMeasure: Pneumococcal Vaccination

Attainment Threshold.47

Benchmark.87

Attainment Threshold.47

Benchmark.87

Attainment Range

performance

Hospital I

baseline•.21.70•

Attainment Range1 2 3 4 5 6 7 8 9

Attainment Range1 2 3 4 5 6 7 8 9

Hospital I Earns: 6 points for attainment7 points for improvement

Hospital I Score: maximum of attainment or improvement= 7 points on this measure

Improvement Range1 2 3 4 5 6 7 8 9• • • • • • • • •

• • • • •

Score

Score

Excerpt from CMS Hospital Value-Based Purchasing Listening Session #2, April 12, 2007

Transparency – Public Reporting

14

www.opa.ca.gov

California General Public Survey, conducted by Harris Interactive (12/07)

Hospitals

HealthPlans

Physicians

Saw Rating Information

23% 26% 22%

Based on these ratings, considered a change

2% 4% 5%

Based on these ratings, actually made a change

1% 1% 2%

Transparency – Public Reporting

Rates for Hip RevisionsRates for Hip Revisions• Total hip revision rates (2006):

− National average: 18% − Kaiser Permanente: 12.8%− Sweden: 7%

Does this reflect more aggressive treatment, or less effective care?

Slide attributed to Thomas Barber, MD, Permanente Medical Group, presented at the CAHP conference, October 2006.

Transparency – Quality Improvement

Countries with National Joint Countries with National Joint Replacement RegistriesReplacement Registries

• 1975: Sweden- Knees • 1975: Sweden-Hips • 1980: Finland • 1987: Norway • 1995: Denmark• 1997: Germany • 1999: New Zealand, Australia • 2001: Canada, Romania• 2003: England, Wales, Slovakia • 2004: Switzerland

Transparency – Quality Improvement

Why doesn’t the U.S. have mandatory device

registries?

Transparency – Quality Improvement

Healthcare as Percentage of GDP• 60%+ of NME passes through public

sector budgets (CMS, public employees, tax breaks, etc.)

• Healthcare at 16.3% of GDP (2007)• Therefore, about 10% of GDP is

healthcare spend passing through public sector budgets (.6 x 16.3% = 9.8%)

Cost and Quality

• Total tax revenues in U.S. (federal, state, local) equals about 28% of GDP

• So, healthcare uses about 1/3 of public sector budgets (.098/28% = 35%) and growing!

• Healthcare at 20% of GDP = 43% of public sector budgets

Healthcare as Percentage of GDP

Cost and Quality

Example: Michigan “Checklist”: • Over 18 months, reduced infections in

ICU by 66%• Estimated 1,500 lives saved• Estimated $100 million saved

Cost and Quality

22

California Pay for Performance

For more information: www.iha.org (510) 208-1740

Pay for Performance has been supported by major grants from the California Health Care Foundation