New Measures in Pay-for-Performance Programs

Pay for performance, or P4P as it is more commonly known, is not a new concept and some plans have been using this type of initiative with providers for a decade or more. Those providers that participate in Medicare's Physician Quality Reporting System (PQRS) - which uses a combination of incentive payments and payment adjustments to promote reporting of quality information - as well as those participating in large Blues plans, will be most familiar with this model.

The shift

What is new is the shift away from P4P as a "bonus" structure and a shift toward an "earning" structure. That is, the extent to which payers are incorporating P4P into their payment strategies means that a portion (or percentage) of providers' revenue is "earned" through meeting P4P targets or measures.

These new models are referred to as "value-based," shifting away from straight fee-for-service payments to some combination of performance- and fee-based compensation, which puts some of the financial risk on providers. The hope is this type of compensation model will improve the quality of care, reduce medical costs over time, and improve patient outcomes. So you can think of the newer P4P models as Pay for outcomes, or P4O.

Under Medicare

The Affordable Care Act expands P4P efforts in hospitals through the establishment of a Hospital Value-Based Purchasing Program begun last year, where hospitals are rewarded for how well they perform on a set of quality measures, as well as on how much they improve in performance relative to a baseline.

The healthcare law also extends the Medicare PQRS program through 2014. However, beginning in 2015 the incentive payments go away, and physicians who do not satisfactorily report quality data will see their payments from Medicare reduced. This marks the real beginning of P4O, in my view, due to the setting of a "quality care" baseline against which the ability to earn will then be tied.

By commercial payers

For commercial payers, value-based contracts are springing up around Patient-Centered Medical Homes (PCMHs) and accountable care organizations (ACOs). However, new and negotiated contracts for generalized services - that is, practices that are not technically a PCMH or ACO - are now typically being crafted with P4P/P4O components that allow practices to "earn" additional dollars or year-to-year increases in multi-year contracts through meeting specific measures and targets.

Theses measure are typically HEDIS-based (Healthcare Effectiveness Data and Information Set) which is a widely used set of performance measures developed and maintained by the National Committee for Quality Assurance (NCQA). Many of these measures are focused on high-cost conditions such as heart disease, diabetes, high blood pressure, as well as preventive measures like immunizations and medication management. New and changed measures for 2014 include breast- and cervical-cancer screenings.

Commercial payers utilizing P4P measures typically have a combination of HEDIS-type "quality" measures as well as "self-reported" measures, where practices can report on items such as EHR implementation and use, and status in achieving NCQA programs such as Patient-Centered Medical Home (PCMH), diabetes, heart/stroke, and back pain recognition programs. In addition to NCQA measures, there is substantial investment underway by the Agency for Healthcare Research and Quality (AHRQ) and other public policy organizations to identify further evidence-based medicine practices that could be used for measurement. And the National Quality Forum (NQF) is leading focused efforts to collect and normalize data, and endorse additional performance measures.

Several Blues plans are (or have already) created P4P programs across their networks. For PCMH-based contracts, these models are often a combination of fee-for-service plus per-member, per-month payments. Some, such as BCBS of South Carolina, have a blend of process and outcome measures (e.g. the process of checking blood pressure on every patient, the outcome of managing high blood pressure in patients by improving that level).

Other examples

• Highmark BCBS, which expanded its P4P program - Quality Blue - in hospitals into a P4O by including outcome measures. It withholds about 10 percent of revenue and then assesses performance of its hospitals against certain indicators. The withheld amount is distributed based upon how well the hospitals perform on the measures.

• UnitedHealthcare, which is rolling out performance-based contracting or PBC contracts in select regions.

• Cigna, which has been developing initiatives to expand its accountable-care contracts and programs around the country.

So where is it all headed? Based on the growing trend toward paying primarily for quality and outcomes, we can only expect to see more of these models rolling out next year.

Susanne Madden, MBA, is founder and CEO of The Verden Group, a consulting and business intelligence firm that specializes in practice management, physician education, and healthcare policy. She is also COO, National Breastfeeding Center, and cofounder, Patient Centered Solutions. She can be reached at madden@theverdengroup.com or by visiting www.theverdengroup.com.