Quantifying Quality

September 15, 2001

Finally, get paid more for providing better care


Early in his career, healthcare policy guru Paul Ellwood, MD, began noticing that the healthcare system rewarded episodes of care, rather than management of care. In other words, recalls the founder of the Jackson Hole Group, treatment of acute problems was at the forefront, and prevention and long-term management of chronic conditions - which would ultimately improve quality and reduce costs -  lagged behind.

Now, a decade after a group of erstwhile healthcare reformers began meeting at Ellwood's Wyoming retreat, quality of care -  including a healthy dose of preventive measures and disease management -  is emerging as the basis of physician incentive plans across the country.

Michael Barrow, MD, who practices with Samaritan North Family Physicians in Dayton, Ohio, is a supporter of -  and a participant in - a quality-based incentive program. "It is a refreshing change to work with payers in this unusual collaboration. Usually payers just act as insurers," says Barrow, who serves on the coordinating council of the Tri-River Healthcare Initiative, an alliance of health plans, purchasers, and physician groups; at the core of the initiative is a quality-based physician incentive plan, funded by a $2 per member/per month fee paid by participating purchasers.

Rethinking the system

"We wanted to reengineer the delivery system and engage the community in designing a plan," says Sam Shalaby, regional director of healthcare initiatives for General Motors' southwest region - one of several major healthcare purchasers that form the Tri-River Initiative. "Quality reduces costs, inappropriate utilization, and variation in treatment patterns. If you focus on cost, you deprive people of needed services."

The Tri-River group engaged the Permanente Co. to conduct an assessment of the Dayton community. The results showed that physicians and plans were not structured to drive quality improvement - the care they provided focused on treatment, not wellness, and there was a lack of coordinated care and disease management programs. The Permanente Co. recommended community-wide initiatives, supporting physician leadership programs, a community health information network, and prevention programs.

Once purchasers were on board, the Tri-River Initiative pulled in Medical Mutual of Ohio, which supplies patient data, as the plan administrator, and Premier Health Partners, which includes two primary-care physician (PCP) groups of 125 providers paid fee-for-service -  including Barrow's practice. Physician incentive markers include

  • conducting health risk assessments and developing written action plans for at least 50 percent of patients;

  • developing disease management programs for diabetes, post-coronary events, hypertension, and tobacco use, enrolling at least 80 percent of at-risk patients;

  • establishing personalized Web sites; achieving patient satisfaction goals; and

  • meeting efficiency indicator goals based on global targets for per member/per month costs.

Each measure is weighted, and incentives are paid to the group, not to individuals. Physicians are eligible to receive some bonus even if they don't accomplish all five goals, and are not subject to a withholding.

In addition, physicians are paid extra - slightly higher than the IDC-9 code for a preventive counseling visit -  for conducting the health risk appraisal, a time-consuming activity they do not undertake on a regular basis.

"The employer/plan/physician relationship is often adversarial, so the partnership represents a new way of looking at healthcare," says Evan Steffens, director of clinical and quality services for Premier Health Partners. Although she says it has taken a hands-on effort to get physician buy-in, "we are all at the same table trying to problem-solve."

Premier's Meenakshi Patel, MD, believes quality-based incentives are a step in the right direction. "Traditionally, [health plans] have pushed physicians to perform excellent preventive and chronic care but have not always reimbursed us appropriately," he says. "By placing money in an incentive pool, it delivers the message that they are 'putting their money where their mouth is,' so to speak. That message is as important as the actual amount in the incentive pool."

Unconventional intervention

Employers, too, are taking a more proactive role in the quality act. When The Everett Clinic (TEC), a 180-physician multispecialty group in Everett, Wash., found itself bogged down in health plan negotiations, a large employer in the market, Verizon, stepped in to avoid disrupted coverage for its employees.

Thomas Davies, Verizon's regional healthcare manager, brokered a compromise between the clinic and payer, resulting in a bonus arrangement - an unusual move for a purchaser.

"Doctors liked that idea since they thought of themselves as part of a high-quality organization," Davies says. "There has always been a business case for quality but nothing had been done about it, even though plans have said they would be willing to pay for it."

In TEC's case, quality benchmarks are based on Health Plan Employer Data and Information Set (HEDIS) measures, such as breast and cervical cancer screenings, childhood immunization rates, pre-natal and post-partum care, diabetes management, and smoking cessation. Each area is weighted, and when the medical group falls into the top percentile compared to all plans reporting to the National Committee for Quality Assurance (NCQA), TEC receives 50 percent of the bonus; if it reaches the 90th percentile, it receives the entire bonus from participating plans. TEC has the potential to receive up to $2.1 million in bonuses this year.

Statewide action?

In keeping with its history as an early adopter of healthcare trends, there is a movement in California by the Integrated Healthcare Association (IHA), headquartered in Walnut Creek, to create a statewide initiative to pay physician groups for achieving documented performance.

To pay for the incentives in its "Pay for Performance" effort, participating plans would set aside 2 percent of the premium associated with professional capitation payments each year for at least three years, building up to a 6 percent pool. If all plans in the state participated, that 2 percent pool would equal $100 million to $150 million.

Measures under consideration combine patient satisfaction, information technology infrastructure improvement, disease management quality initiatives, preventive screenings, immunizations, and use of antibiotics. "Medical groups will get rewards for improvement, not just for reaching benchmarks," says Beau Carter, IHA executive director. "The bonuses have to serve as an incentive, not just be money given to a medical group for what it's already doing."

Blue Cross of California introduced a quality financial bonus six years ago to help improve their quality scorecard rating. The incentives are based on a variety of satisfaction indicators including rate of appeals and grievances, preventive health and onsite quality management audits, and voluntary member transfers from medical groups.

Bonuses for the 170 participating medical groups/independent practice associations (IPAs) come from Blue Cross and are not only based on performance, but also on the number of patients. "These incentives are more in line with what consumers are seeking from the HMO world - rewarding doctors for performance, not for withholding care," says Michael Belman, MD, medical director of Blue Cross of California.

The 130-physician, multispecialty Beaver Medical Group in Redlands, Calif., participates in the Blue Cross program. Ron Bangasser, MD, medical director, says that although his group is already achieving many of the clinical measures, attention to the data provided by the plan has enabled the group to do an even better job.

Beaver also gives individual physicians small incentives -  movie passes and gift certificates -  for accomplishing clinical objectives such as monitoring and calculating the right dose of Coumadin for patients with atrial fibrillation.

While quality-based incentive plans remain the exception rather than the rule, they reflect increasing attention to quality as a means of improving healthcare delivery, as espoused by organizations such as the Institute of Medicine, which encourages development of "payment policies that reward quality," and physicians who have long resisted the emphasis on cost savings over appropriate and thorough care.

Mari Edlin can be reached at editor@physicianspractice.com.

This article originally appeared in the September/October 2001 issue of Physicians Practice.