Pay for performance--for whom the bell tolls.

There is a clear beacon on the horizon being lit and maintained by the federal government, third-party payers and some hospital associations that makes it clear that some form of pay for performance will be part of our vocabulary in the near future.

These initiatives are being driven by stress on the Medicare trust fund at the federal level, as well as the rapidly increasing presence of publicly reported hospital and physician report cards on the Internet.

There is a slow but steady realization across the country that the misalignment of hospital and physician incentives as etched in stone by the diagnostic related groups (DRG) payment system, has bred three decades of adversarial relationships that have taken a toll on health care quality.

The two-and-a-half decade journey through the managed care era reduced reimbursement for health care, but not its costs, and further alienated physicians and hospitals.

It is clear that if healing is ever going to take place, we must be able to tap into the power of the health care team that has as its core mission the delivery of safe, effective and efficient health care--a hospital and its associated physicians.

The coming era of a risk-adjusted DRG system will go a long way to toward leveling the playing field of the "utilization game" that is currently played on the medical floors.

The key then will be the development of a sensible, risk-adjusted practice guideline, heretofore the Holy Grail of utilization management.

History

As early as 1999, the Office of the U.S. Inspector General issued a bulletin advising that any sharing of savings by hospitals with physicians was prohibited in most circumstances as it was determined to violate the Civil Monetary Penalties Statute (the "CMP").

This meant that for all reasonable intents and purposes, gainsharing would not be permitted. This opinion was modified in 2001 when the OIG admitted that gain-sharing in certain circumstances might be allowed.

An attempt by the New Jersey Hospital Association to design a gainsharing demonstration project got through approvals by the Center for Medicare and Medicaid Services but was eventually shut down by a federal judge as a result of a lawsuit that was filed by a few hospitals in New Jersey that sued to be included in the demonstration.

The ruling, which had nothing to do with the reason the lawsuit was filed, again cited the violation of the CMP as the reason for halting the project. Most recently, the OIG issued a number of advisory opinions that approved gainsharing arrangements with cardiology and cardiac surgical groups, allowing the physicians to share in savings achieved by curbing inappropriate use of supplies, and reducing unnecessary variation in care.

As long as safeguards are in place to assure that care will not be withheld from patients, it seems that gainsharing may become a more common bond between hospitals and their medical staffs.

What quality issue?

To what extent should physicians actually share in savings derived from such demonstration projects? What are we trying to accomplish by allowing a hospital to share doctor-derived savings with the doctors?

There is no clear consensus what it is we want our physicians to do. Most hospitals participate in a variety of programs that measure compliance with well-established medical standards. Examples of these include, but are not limited to, the JCAHO Core Measures, the PRO 7th Scope of Work, etc., that monitor compliance with, for instance, the administration of aspirin upon admission for a myocardial infarction.

Pundits argue that we should not be paying doctors extra for practicing evidence-based medicine. But it's difficult to explain the fact that compliance with beta blocker administration in myocardial infarction at a major teaching hospital in the year 2000--although better than at minor teaching and non-teaching hospitals--was only 48 percent. (1) This is despite the fact that evidence of the beneficial effect of beta blockers post MI was well-established about 20 years before the study took place. Certainly this represents a quality gap, but not necessarily one that is amenable to gainsharing.

It is the efficiency side of quality that is most amenable to the pay-for-performance model because it is widely viewed by physicians to be a hospital problem. The ability of a hospital to invest its resources in its physicians' ability to improve the efficiency with which care is delivered is the key to pay for performance.

Rules of engagement

Engaging physicians in pay for performance should not be taken lightly by a hospital. The risks for a hospital are financially high and probably won't bear fruit in a highly adversarial environment where at least a modicum of trust and a track record of physician-friendly decisions aren't present.

The rules of engagement have to be well understood; the argument that efficiency of care is a vital quality issue directly driving patient outcomes must be firmly established and the data that are going to be used to establish best practice norms and by which physician performance will be measured must be impeccably clean.

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Risk adjustment must be established to mitigate any of the usual physician arguments about acuity of illness in his or her patient population.

Establishing a physician-dominated oversight committee is essential to the launch of any pay-for-performance effort. This group must have the power to set the goals for individual physicians based on risk-adjusted physician practice profiles. The group also must evaluate plans for individual physician improvement before allowing physicians to reap any financial benefit from participation in the project.

Risk-adjusted physician practice profiles, if done correctly, become the de facto risk-adjusted clinical guidelines that will drive efficiency in the end. The oversight committee must also devise a methodology to mitigate any possible argument that physicians may take advantage of a pay-for-performance program at the expense of the patient.

Incentives for reduced length of stay could lead an unscrupulous physician to admit patients to the hospital who don't really need hospitalization, do inpatient surgery on patients who could otherwise be done as an outpatient and to discharge patients prematurely from the hospital. Similarly, incentives to reduce costs per case may cause the same physician to withhold essential care.

Ethics dictate that all patients being admitted to a hospital should be informed about any pay-for-performance arrangements that might exist at the time.

Patient care management (case management) will become a pivotal tool in pay for performance. Strict attention to admission criteria, 7- and 30-day readmission rates and adherence to the risk-adjusted clinical guidelines are invaluable tools in monitoring the true success of increasing the efficiency of care.

In the final analysis, both hospitals and physicians believe that an enormous patient benefit can come from alignment of financial incentives. Those of us who will be responsible for the design and execution of these programs at the hospital level must understand the scrutiny that pay for performance will receive from patients, attorneys and the legislature.

There can be no tolerance for those who would game the system or otherwise undermine the integrity of a well-planned oversight function. Having passed through the era of managed care, if pay for performance fails there are not too many models left to try.

Robert M. Pickoff, MD, MMM is chief medical officer of Hunterdon Healthcare System in Flemington, N.J. He can be reached at 908-788-6155 or [e-mail]

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Reference

1. Allison JJ. and others. Relationship of hospital teaching with quality of care and mortality for Medicare patients with acute MI. JAMA 2000; 284(10): 1256-62.

By Robert M. Pickoff, MD, MMM