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Performance appraisal as a modifier of physician behavior.

A for-profit, staff-model, prepaid plan, CIGNA Healthplans of California serves approximately 400,000 members in Southern California. The medical staff comprises more than 350 full-time physicians practicing in 30 offices in Los Angeles and Orange Counties. The size of the office medical staffs varies from 5 physicians to more than 60. Medical management functions in a matrix format, with each physician relating to a clinical specialty department and to a physician chief of staff for his or her office.

Physicians are paid a salary plus an annual bonus. Prior to 1989, annual raises for physicians were determined by cost of living factors and a brief, subjective performance review completed by the chief of staff of the physician's office. The former was across the board, and the latter constituted a "merit" raise.

The Appraisal System

In 1987, management developed a strategy to improve the health plan's performance by focusing attention of all staff on the three basic areas of health care delivery: quality of care (the science of medicine), quality pf service (the art of medicine), and cost effectiveness (the business of medicine). To challenge physicians to improve all three aspects of their practice, medical management changed all annual raises to "merit raises" and developed an annual bonus system based on the physician's merit ranking among specialty peers and on the medical costs per member per month of the health plan. In order to provide an equitable and objective evaluation of a physician's performance in such a large and diverse health plan, the "Performance Evaluation and Planning Program" (PEPP) was developed. The purpose of the PEPP program was to improve physicians' practice performancy by:

* Improving communication between physicians and physician managers.

* Clarifying expectations and accountability.

* Establishing specific objectives for improving performance in the coming year.

* Improving the objectivity and credibility of the performance evaluation process.

To achieve these goals, the performance appraisal was approached from the point of view of all three aspects of practice. The responsibility for quality of care appraisal was assigned primarily to the clinical specialty of each physician. Input was obtained from peer reviews, quality assurance audits, and the clinical department head's and department chairman's impression based on chart reviews and observations of the physician's practice. Quality of service appraisal was the responsibility of the chief of staff of the office where that physician practices. Input was obtained from patients, support staff, pharmacists, and colleagues. Cost effectiveness was to have been evaluated by financial data based on per member per month costs of the physician's practice and financial performance of the physician's local office and specialty department. These reports were not available during 1989 and so are not reflected in the physician's responses in this report. For the 1989 performance appraisal, cost effectiveness of the physician's practice was subjectively evaluated by the physician's department head and chief of staff.

The process followed in 1989 required that each physician complete a "self-appraisal," which was forwarded to the chief of staff or department head. The physician's chief of staff and specialty department head completed their portions of the appraisal. An appraisal interview was then conducted by the specialty department head or chairman for all specialists except family practice and pediatries. These physicians were interviewed by their office chief of staff. The appraisal was reviewed with the physician, and objectives for 1990 were developed. The physicians' rankings in their departments, which would determine their merit, was communicated during this process.

Initial Results

The PEPP program was an expensive process because of the amount of time that was required to complete appraisals for 360 physicians. It therefore was essential to ensure that the program was achieving its stated purposes. To evaluate the first year of the "PEPP" program, a questionnaire was sent to all 365 physicians in March 1990 to determine their opinions about the performance appraisal concept and to obtain their feedback about the process as they experienced it. One hundred and seventy-four physicians returned their questionnaires (48 percent of those surveyed). Respondents were identified only by specialty and longevity with the health plan (greater or less than 5 years on staff). The questionnaire addressed the validity of the performance appraisal concept and the credibility of the various sources who had input into each performance appraisal. The survey was also intended to evaluate the process each physician had experienced during 1989 and how much impact the performance appraisal had upon his or her practice.

There were no significant differences in responses based on longevity with the health plan. There were significant differences in responses to certain questions among various specialties. Responses to the opinion questions revealed that the physicians attached "high value" to the performance appraisal as a measure of their quality of care and service but only "some value" as a measure of their cost effectiveness.

Physicians rated their specialty department heads "most qualified" to evaluate all aspects of their practice. The only specialty exception was family practice. Family practitioners were primarily office-based and rated their office chief of staff as "most qualified" to evaluate quality of care and service. "Peers" were rated "very qualified" for quality of care and service. Responses rated patients "most qualified" to evaluate service but "not qualified" for cost effectiveness. "Administrators" were rated "somewhat qualified" to rate service and cost effectiveness but "not qualified" for quality of care.

Responses to the question, "Have expectations for your practice been communicated to you prior to your appraisal?," revealed that medical managers have done an above-average job of communicating quality of care and service expectations but only a fair job for cost effectiveness guidelines. The surgical specialties and OB/GYN departments scored highest in communicating expectations in all three areas. Primary care departments scored lower in communicating expectations, especially for cost effectiveness. These departments (family practice, pediatrics, and internal medicine) were large departments with multiple locations and more medical managers to deal with. All specialties except family practice gave above-average scores to their specialty department heads and chairman for their impact on changing and improving physicians' practice.

Responses to questions about the effectiveness of the "process" of performance appraisal each physician experienced during 1989 revealed that, overall, only 71 percent received a written appraisal. Responses by specialty ranged from 53 to 83 percent. Only 68 percent had a personal interview, and only 50 percent developed a plan for improvement. Two questions designed to measure "bagging" by physician managers (saving compliments or criticisms until performance appraisal time) revealed that 22-25 percent of all physicians experienced some unexpected criticisms or compliments at performance appraisal time. The specialty ranges of 6 to 50 percent on these items indicated that some departments were doing an excellent job of communicating with their staffs and that others required more training of their medical managers.

The 1989 appraisal process was given a "poor" score for timeliness because of the amount of input required and the relative inexperience of health plan staff with the new procedures. The process received overall "good" ranking for completeness and fairness and "fair" marks for validity and usefulness. In response to the most important question of "how much difference did it make?" in a physician's practice, 41 percent of the 130 physicians who participated in the appraisal process said that it did make a difference.

Physicians' suggestions for improving the PEPP program emphasized the need for more patient input, especially in the area of service. There were several requests for more hard data on productivity and cost effectiveness and more frequent feedback on all aspects of practice. There was a general appeal for more objectivity, simplicity, and timeliness in the appraisal process.


Physicians' responses to the first year of the new performance appraisal process revealed a high level of confidence in the concept of the program. Specialty leaders and peers had high credibility for evaluating quality of care. Physicians believed that patients were most valuable for evaluating the quality of service they provided and that hard "financial" data were required to measure the cost effectiveness of their practices. The 40 percent response rate to a voluntary, anonymous questionnaire indicated a high degree of interest in the performance appraisal process, probably because physicians recognized its connection to their compensation. The observation by 41 percent of physicians who participated in the appraisal process that it had a positive impact on their practice was a promising sign. The overall results indicated that more training of medical management and refinement of the procedures were required to successfully achieve all the goals of the program.

Specialty-based peer review needed to be further developed to become a major input into the quality of care portion of the appraisal. A monthly telephone "member survey" was implemented during 1990 to give frequent direct feedback to physicians regarding patients' opinion about their "quality of service." Per member per month cost reports by physician, specialty, and office were made available in 1990 to give physicians more feedback about the cost effectiveness of their practices. It was anticipated that as these more objective and credible tools were utilized, the performance appraisal and planning process would become a more effective tool to recognize outstanding physicians and to motivate physicians to improve all areas of their practice.

At the time this article was written, Thomas C. Davis, MD, FACPE, was Regional Medical Director and James F. Reilly, MD, FAAFP, was Chief of Staff, West Covina Health Care Center, CIGNA Healthplans of California, Arcadia. Dr. Davis now is Medical Director, Northern Region, Intergroup of Arizona. Dr. Reilly is now Medical Director, CareAmerica, Chatsworth, Calif. Dr. Davis is a member of the College's Society on Managed Care Organizations and of its Forum on Bioethics.
COPYRIGHT 1991 American College of Physician Executives
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Copyright 1991, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:CIGNA's appraisal system
Author:Reilly, James F.
Publication:Physician Executive
Date:Nov 1, 1991
Previous Article:Total quality management and the utilization review process.
Next Article:Defining quality physicians.

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