Promote the use of health information technology to improve the quality of care for chronically ill Medicare patients.

Promote using well being data expertise to enhance the standard of look after chronically ailing Medicare sufferers.

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➤ Intensivists

➤ Leapfrog Group

➤ Pay-for-performance (P4P) packages

Understanding isn't sufficient; we should apply. Wil l ing isn't sufficient; we should do.

—Johann Wolfgang von Goethe

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INTRODUCTION In line with The Commonwealth Fund (see Spotlight 12.1), waste and medical errors add $100 billion to U.S. healthcare bills and will price 150,000 lives yearly. To encourage high quality enchancment and extra environment friendly supply of healthcare companies, the federal government, insur- ance corporations, and different teams implement pay-for-performance (P4P) packages, which supply monetary incentives to physicians, hospitals, and different healthcare suppliers in trade for assembly sure efficiency targets. P4P initiatives may also scale back the funds suppliers obtain in the event that they commit medical errors, have poor high quality outcomes, or incur extreme prices.

An consciousness of P4P choices is necessary in strategic planning. To maximise a corporation’s revenue and enhance high quality and effectivity within the supply of care, strategic planners incorporate aims into the strategic plan which can be geared towards attaining P4P efficiency targets.

MEDICARE PAY-FOR-PERFORMANCE INITIATIVES As a part of the Medicare Prescription Drug, Enchancment, and Modernization Act of 2003, Con- gress directed the Institute of Medication to determine methods to raised align healthcare efficiency


(P4P) packages

initiatives carried out

by the federal government,

insurance coverage corporations,

and different teams to

reward suppliers for

assembly sure perfor-

mance targets within the

supply of healthcare


HIGHLIGHT 12.1 The Commonwealth Fund

The Commonwealth Fund is a personal establishment whose purpose is to enhance entry to care,

high quality of care, and effectivity of care in the US. The Commonwealth Fund is

particularly desirous about serving to weak individuals obtain higher care: the low-income

inhabitants, the uninsured, minorities, younger kids, and the aged.

To realize these targets, The Commonwealth Fund helps impartial analysis on

how care may very well be improved. For instance, The Commonwealth Fund has revealed re-

ports on such subjects as bronchial asthma outcomes in minority kids and causes for affected person

readmission to hospitals after discharge. It additionally publishes reviews to tell the general public,

resembling its evaluation of the totally different healthcare reform payments proposed by the U.S. Home

of Representatives and Senate in late 2009. A lot of its publications present data

and statistics in regards to the present state of healthcare in the US.

Financed by people and organizations that help its mission, The Widespread-

wealth Fund grants cash to tax-exempt organizations and public companies to enhance

the availability of healthcare and to check and suggest coverage modifications that can enhance

the healthcare system. For instance, a few of its grants help packages that research the

way forward for Medicare and the care of frail aged adults.


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HIGHLIGHT 12.2 Analysis-Associated Teams

Analysis-related teams (DRGs) are a affected person classification scheme utilized by hospitals

to determine the ailments they deal with. Every illness is grouped with related ailments and as-

signed a code in order that physicians, billing departments, and payers (notably Medicare)

can simply determine the prognosis. Assigned to every code is an amount of cash the payer

will reimburse a supplier for remedy of that prognosis. The quantity of reimbursement

is predicated on the typical price of offering look after that sickness and consists of the price of in-

hospital nursing care, room and board, diagnostic remedies, and every other remedies

that is perhaps crucial (routine) for that sickness whereas a affected person is within the hospital. The

fee doesn't embody the doctor’s charges.



with the Medicare fee system. The act required that efficiency measures be recognized, that the Medicare fee system be used to reward efficiency, and that information and informa- tion expertise necessities be addressed. It proposed P4P as a long-term incentive Medicare might use to enhance the standard of the U.S. healthcare system.

Traditionally, Medicare (CMS) has supported initiatives to enhance healthcare qual- ity of care in physicians’ workplaces, ambulatory surgical procedure facilities, hospitals, nursing houses, and residential well being care companies. The premise of CMS’s latest P4P initiatives is collaboration with suppliers to make sure that legitimate measures are used to attain improved high quality. CMS has explored P4P initiatives in nursing dwelling care, dwelling well being care, dialysis, and coordina- tion of look after sufferers with continual sicknesses (CMS 2005). A few of these initiatives are described within the sections that comply with.


The Hospital High quality Initiative (HQI) was launched nationally in November 2002 for nurs- ing houses after which expanded in 2003 to dwelling well being care companies and hospitals. In 2004, it was additional expanded to incorporate kidney dialysis services that present companies for sufferers with end-stage renal illness. The HQI targeted on a set of ten hospital high quality measures. To learn from this initiative, a hospital needed to measure its stage of high quality in these ten areas and report these information to CMS. Hospitals that submitted the required information acquired full Medicare DRG funds. (See Spotlight 12.2 for a dialogue of diagnosis-related teams [DRGs].)

Whereas the HQI has concluded, CMS at the moment has greater than 375 measures in place to evaluate healthcare high quality. These measures are designed to benchmark high quality in

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the next healthcare settings: inpatient hospitals, physicians, nursing houses, dwelling well being, finish stage renal illness, prescribed drugs, and Medicare Benefit (CMS 2010b).

Linking the reporting of hospital high quality information with P4P is an efficient technique for bettering the U.S. healthcare system. Such a program will present monetary incentives to organizations that spend money on high quality enchancment. A 2007 research discovered that hospitals scoring within the backside quintile on high quality efficiency measures improved by 16.1 per- cent after taking part within the Hospital High quality Initiative (Lindenauer et al. 2007), clearly documenting the constructive affiliation between P4P and improved hospital high quality. Fur- thermore, analysis reveals that by growing P4P funds to make them compose 15 p.c of whole compensation, suppliers would have better incentive to spend money on well being data expertise and different actions to enhance high quality in order that they obtain that full 15 p.c (Damberg et al. 2009).

Premier Hospital High quality Incentive

In 2003, CMS introduced an indication challenge known as the Premier Hospital Qual- ity Incentive, which paid bonuses to hospitals on the idea of their high quality efficiency in 5 medical areas: coronary heart assault, coronary heart failure, pneumonia, coronary artery bypass graft surgical procedure, and hip or knee replacements. Hospitals that ranked within the prime 10 p.c for a selected situation acquired a 2 p.c bonus on its medical funds, and hospitals within the subsequent 10 p.c acquired a bonus of 1 p.c. The challenge lasted 4 years. Within the last 12 months of the demonstration challenge, hospitals with poor high quality outcomes had been financially penalized. Bonuses averaged $71,960 per hospital yearly however had been offset by monetary

HIGHLIGHT 12.2 Analysis-Associated Teams

The quantity a hospital receives in reimbursement can be influenced by such elements

because the hospital’s location (city or rural), the variety of low-income sufferers it treats,

employees compensation (wage index), and the kinds of ailments it treats in a 12 months (case combine).

Reimbursement is larger if the hospital is a coaching website for medical college college students.

The DRG system was developed within the 1980s to regulate prices and encourage hospitals

to supply care extra effectively. The hospital is paid a predetermined fee, so it can attempt

to not spend greater than that fee in treating the affected person. DRGs, of which there are about

500, are up to date yearly by CMS.

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penalties for the hospitals within the backside 20 p.c (Premier 2010). The offset equaled the entire quantity by which the reimbursement for hospitals within the backside 20 p.c was decreased. This quantity was divided up and paid to the hospitals with the very best high quality, along with their bonuses.

Last outcomes of the initiative discovered that taking part hospitals improved their qual- ity by a mean of 17.2 p.c over the four-year research interval. The research estimated that the enhancements saved the lives of an estimated four,700 coronary heart assault sufferers (Premier 2010). In whole, CMS awarded over $36.5 million in P4P funds in the course of the demon- stration. Of this quantity, $12 million was awarded over the past 12 months of the challenge. An evaluation of the research outcomes discovered that if all U.S. hospitals had been in a position to obtain the price and high quality enhancements skilled on this challenge, 70,000 lives could be saved yearly and hospital prices could be lowered by over $four.5 billion per 12 months (DeVore et al. 2010).

Newer CMS initiatives to enhance the standard of inpatient care require col- lecting information on 34 high quality measures relating to 5 medical situations: coronary heart assault, coronary heart failure, pneumonia, surgical care, and bronchial asthma care. These high quality measures had been developed collectively by personal healthcare organizations and authorities establishments. Hospital-specific efficiency is publicly reported on CMS’s Hospital Examine web site.


The Medicare, Medicaid, and SCHIP Advantages Enchancment and Safety Act of 2000 mandated the primary Medicare P4P initiative for physicians. This program, known as the Doctor Group Observe Demonstration, started in April 2005 and was designed to evaluate the impression of P4P on massive medical teams. Particularly, it rewarded physicians for bettering the standard and effectivity of healthcare companies delivered to Medicare fee-for- service beneficiaries (sufferers). It inspired coordination of Medicare Half A and Half B companies, promoted effectivity in high-performance work processes, and paid physicians for bettering medical outcomes (CMS 2005). Initially meant to be a three-year dem- onstration, this challenge was prolonged to 5 years and continued till the top of March 2010 (CMS 2010a).

Ten massive group practices of greater than 200 physicians every participated on this demonstration. Collectively, these ten teams represented 5,000 physicians and a various group of over 220,000 Medicare sufferers. The doctor group practices had been eligible to earn performance-based funds after attaining financial savings better than these achieved by a management group whereas sustaining high quality scores (CMS 2005). The research discovered that these financial savings had been generated by lowering pointless hospital admissions, stopping readmis- sions, and minimizing emergency room visits. The P4P bonuses had been linked to 32 ambu- latory care high quality measures beforehand validated by the Nationwide Committee for High quality Assurance as a part of HEDIS (see Chapter 13, Spotlight 13.2). The demonstration challenge discovered that efficient methods for high quality enchancment included supplier suggestions from

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particular person profile reviews, elevated use of medical protocols, and redesigned workflow processes that incorporate digital medical data (CMS 2006).


CMS’s Care Administration Efficiency Demonstration was a three-year doctor P4P challenge designed to advertise using well being data expertise to enhance the standard of look after chronically ailing Medicare sufferers. Initiated in July 2007, this challenge paid bonuses to physicians who exceeded CMS efficiency requirements in medical supply methods and affected person outcomes. In distinction to the Doctor Group Observe Demonstra- tion described earlier, this demonstration targeted on small and medium-sized doctor practices situated in Arkansas, California, Massachusetts, and Utah (CMS 2009a).


CMS’s Persistent Care Initiative used a illness administration mannequin to handle chronically ailing sufferers with congestive coronary heart failure or advanced diabetes. Collaborating organizations needed to assure CMS a specific amount of financial savings. Reimbursement by CMS was contingent upon assembly high quality measures and affected person satisfaction scores. Collaborating organizations included Humana in South and Central Florida; XLHealth in Tennessee; Aetna in Illinois; LifeMasters in Oklahoma; McKesson in Mississippi; CIGNA in Georgia; Well being Dia- log in Pennsylvania; American Healthways in Washington, DC, and Maryland; Visiting Nurse Service of New York; and United Healthcare in Queens and Brooklyn, New York.

This program advanced into the Medicare Well being Assist program. The aim of this system was to extend using evidence-based protocols, scale back pointless hospitalization, and decrease prices related to continual situations. This system’s P4P part was pushed by high quality enchancment, Medicare price financial savings, and improved affected person satisfaction. Section I of this system included roughly 100,000 chronically ailing Medicare sufferers and formally ended August 31, 2008. CMS is at the moment evaluating the outcomes and can submit a last report by February 2013 (CMS 2008).


This demonstration assessments fashions of care administration for Medicare sufferers who're each excessive price and excessive threat. The fee methodology is just like that carried out within the Persistent Care Enchancment Program, in that taking part suppliers are required to fulfill related medical high quality requirements in addition to assure financial savings to the Medicare program (CMS 2005). In 2009, CMS granted a three-year extension of this program. This initia- tive is necessary as a result of it demonstrates that managing the care of high-cost Medicare beneficiaries may end up in price financial savings in addition to improved high quality (CMS 2009b).



CMS isn't the one entity providing P4P incentives. U.S. well being plans and different payers are additionally growing P4P packages to enhance the standard of care and decrease future price will increase. As of 2005, there have been greater than 150 business P4P packages in operation (Baker and Carter 2005). Empire BlueCross BlueShield (headquartered in New York Metropolis) and Built-in Healthcare Affiliation (headquartered in Oakland, California) are examples of two business organizations providing P4P packages.


The Leapfrog Group, based in 2000, is a coalition of greater than 65 employers that buy look after greater than 34 million U.S. workers. The mission of the Leapfrog Group is to make use of em- ployer buying energy to enhance the standard, effectivity, and affordability of U.S. healthcare. Employer members of the Leapfrog Group anticipate the healthcare organizations their workers use to fulfill a sure stage of high quality and effectivity. If Hospital XYZ, for instance, doesn't carry out as much as these ranges of high quality, the Leapfrog Group can inform its employer members to not use Hospital XYZ. Consequently, Hospital XYZ loses the enterprise of those members’ workers. As a part of this work, Leapfrog supplies P4P incentives geared towards bettering affected person security and growing the worth shoppers obtain for his or her healthcare spending.

Leapfrog’s hospital reporting initiative, carried out in 2001, assesses hospi- tal efficiency on the idea of high quality and security measures developed by the Nationwide High quality Discussion board (NQF). Hospitals that meet or exceed NQF’s benchmarks have been profitable in lowering medical errors. Hospitals that take part within the reporting initiative are eligible for the Leapfrog Hospital Recognition Program, which is a hos- pital P4P program that gives monetary advantages and public recognition for assembly Leapfrog’s requirements. As a part of this recognition program, Leapfrog posts participat- ing hospitals’ scores on its web site to be used by employers and shoppers (Leapfrog Group 2010).

Employers that be part of the Leapfrog Group agree to coach their workers about affected person security and hospital high quality. In addition they conform to encourage their workers to hunt care from hospitals that meet Leapfrog’s security requirements; for instance, workers who use these hospitals would not have to pay copayments. Such actions have been extremely efficient in shifting sufferers to healthcare suppliers that meet Leapfrog’s requirements. Everybody advantages; sufferers are steered to safer hospitals and, consequently, hospitals obtain extra enterprise. Con- versely, Leapfrog removes hospitals from its register of accredited suppliers if their high quality and security scores decline (Leapfrog Group 2010).

Up to now, a lot of Leapfrog’s focus has been on computerized doctor order entry (CPOE) and doctor staffing in intensive care items. In an analysis of 1,860 hospitals,

Leapfrog Group

an impartial orga-

nization, developed by

main employers, that

makes use of buying energy

to enhance the standard

and effectivity of U.S.

healthcare companies

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Leapfrog discovered that hospitals utilizing CPOE have larger high quality scores and decrease mortality than these not utilizing CPOE (Jha et al. 2008).

Leapfrog can be driving important enchancment in affected person security and high quality of care by means of a program that focuses on staffing intensive care items with doctor special- ists known as intensivists. The intensivists program is saving an estimated 20,000 lives annu- ally. The bonuses Leapfrog supplies on this program are funded by means of financial savings generated from lowered size of keep and fewer readmissions (Delbanco 2006).

PHYSICIANS’ ATTITUDES REGARDING PAY FOR PERFORMANCE Many physicians categorical a scarcity of belief in well being plan and authorities initiatives impos- ing change. Nonetheless, one of many first nationwide surveys on physicians’ attitudes about P4P, accomplished in 2005, discovered that 75 p.c of responding physicians supported monetary incentives for improved high quality when the measures they had been required to report had been deemed as “correct” by an authority on these measures. A a lot smaller share of physicians indicated help for public reporting for medical group high quality efficiency. The survey additionally discovered that physicians who at the moment have monetary incentives for high quality had been extra more likely to help future P4P packages (Casalino et al. 2007).

GROWING DEMAND FOR QUALITY-RELATED DATA There's a rising demand for quantitative information on healthcare high quality. P4P packages use these information to suggest high quality measures, design monetary incentives, and create measure- ment methods. As a result of continual situations account for 75 p.c of medical prices, they stress the significance of gathering information on continual care. In addition they stress the significance of utilizing present high quality measures based mostly on peer-reviewed nationwide requirements of care. The evaluation of high quality information can take greater than a 12 months, resulting in delays in reporting on hospital high quality and stopping well timed P4P bonuses (Younger and Conrad 2007).

FUTURE PAY-FOR-PERFORMANCE INITIATIVES: PAYING FOR VALUE Suggestions for future initiatives in P4P embody incorporating the idea of “pay- ing for worth.” From the affected person’s perspective, worth consists of high-quality healthcare at an inexpensive value. Prime quality means glorious outcomes, patient-centric care, and excessive ranges of affected person satisfaction. Future paying-for-value initiatives might want to require physi- cians to restrict the variety of assessments they order that don't enhance morbidity or mortality. These initiatives will even have to mandate that physicians present care based mostly on medical protocols developed utilizing evidence-based analysis and accredited by knowledgeable associa- tion applicable to the medical space during which these protocols are for use.


doctor specialists

who employees intensive

care items

INCORPORATING PAY-FOR-PERFORMANCE INTO A STRATEGIC PLAN Present and previous P4P initiatives have targeted on bettering high quality and lowering prices— two key elements in gaining a aggressive benefit. Subsequently, it will be important that hospi- tal planners incorporate P4P initiatives into the strategic plan. Strategic planners ought to routinely monitor their CMS Hospital Examine high quality scores to get them to the extent wanted to obtain CMS’s P4P incentives. If their scores are already at that stage, they need to deal with driving them up additional to maximise the rewards and reimbursement CMS affords; the upper the standard, the better the reward. Planners have to allocate cash to spend money on packages and new expertise that can assist the hospital enhance its high quality scores. In areas the place high quality is poor and unlikely to alter, the strategic planner ought to take into account closing the service so affected person security isn't jeopardized. Consequently, the hospital might be much less more likely to incur malpractice fits.

Mayo Clinic is an excellent instance of a corporation that has integrated P4P into its strategic planning course of. It routinely evaluates new enterprise initiatives that would improve the standard of care it supplies. Demonstrating its potential to organize for the longer term effectively prematurely, Mayo even benchmarks its high quality and effectivity efficiency towards P4P requirements which have been developed however should not scheduled to be carried out till a number of years from now.

SUMMARY Federal healthcare policymakers and state regulators have reputable considerations in regards to the unfavorable impression that lowered reimbursement for healthcare companies, low hospital occu- pancy, and poor effectivity can have on the standard of healthcare. In addition they acknowledge that the ageing inhabitants and excessive fee of inflation in healthcare will proceed to drive up healthcare prices. By working in a way in line with evolving healthcare coverage and the standard requirements set forth by P4P packages, hospitals can obtain monetary and different rewards (e.g., a repute for excellence), all of which is able to place them in a stronger aggressive place.

  1. Consider the assertion that P4P is the newest fad in healthcare reimbursement and can have little impression on the healthcare business.
  2. What do you see as the way forward for P4P within the healthcare business?


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