Implementing Pay-for-Performance Programs:
A Data-Driven Approach

Pay for performance programs represent an opportunity to improve the quality and efficiency of health care. The promise of P4P has been embraced by the health care community and the prevalence of P4P programs continues to grow.

The Centers for Medicare and Medicaid Services have several demonstration projects underway evaluating the real effect of P4P on physician and provider quality of care. Further, the Commonwealth Fund reports that more than 100 private and federal pilot programs are underway to assess the promise and real effects of P4P.

The Promise of Pay for Performance

Pay-for-performance programs appeal to health plans as a way to drive down costs while improving the quality of care provided to their members. P4P can help health plans achieve this goal by guiding them through the compensation determination for physicians and hospitals based quality of service measures and costs to provide that service to members.

Compensating providers based on the quality and cost of their care, incentivizes providers to provide the best, most cost-effective care possible, minimizing unnecessary and expensive services for which employers and other health care purchasers pay.  Further, improving patient care now means healthier patients down the road, driving down costs and improving outcomes across the health care system.

Unfortunately, the promise of P4P is limited by the difficulties organizations encounter implementing an effective, comprehensive pay-for-performance system. Challenges include:

• Identifying the right data for analysis
• Equitably measuring provider performance
• Communicating actionable results and educational information to physicians to drive improved quality of care
• Establishing a reconsideration process
• Monitoring and evaluating the effectiveness of the program

“Designing and implementing an effective P4P program is a complex task,” says Dr. Dogu Celebi, senior vice president of Clinical Affairs for Ingenix.  “Health plans need to take a comprehensive and integrated approach to design, develop, implement and monitor P4P.”

Identifying the right data for analysis

To craft a P4P system, health plans first must determine how – and what – to measure. Sophisticated analytics and data mining methodologies can help organize the vast quantity of data available and enable measurement based on cost and quality. 

An episode of care grouper is an essential tool to help health plans weed through massive amounts of data to drive cost and quality analyses. Dan Dunn, senior vice president of Research & Development for Ingenix, explains: “Episodes of care are used to identify unique conditions for a patient and then to understand all of the services involved in diagnosing, managing and treating those conditions.” Armed with the information provided by an episode of care grouper, health plans can attribute specific episodes to the appropriate provider and begin further analysis.

Equitably measuring provider performance

Discretely identifying the services associated with treating specific conditions allows health plans to calculate the cost of those services. “The Ingenix Symmetry Episode Treatment Groups (ETG) tool is used in P4P to understand the dimensions of cost of care, such as what resources are necessary for the physician to treat an episode associated with a particular condition,” says Dunn.  

To measure quality of care, health plans can compare providers to evidence-based guidelines and nationally recognized standards of care. Solutions like Ingenix Symmetry EBM Connect consider 52 medical conditions and nearly 500 components of care associated with those conditions to analyze a provider’s performance. Dunn says: “Health plans can identify deviations from published medical guidelines and communicate with providers who are managing a patient’s care. Then they can develop measurement scores for providers, so physicians understand their performance against guidelines.”

Measurement tools empower health plans to take a critical step toward effective P4P programs -- evaluating physicians equitably by comparing like treatments for like conditions, along with the cost at which physicians deliver care.

Educating and communicating physicians

Equally important to creating scores that help health plans understand and compare overall cost and quality performance, is to communicate that information with providers. Analytic engines can develop reports that help payers and providers communicate about quality and cost of care.

Reporting tools such as Ingenix Impact Analysis allow health plans and providers to compare physician performance results. “Impact Analysis helps plans and providers produce simple reports that reveal the drivers of physician score results,” says Dunn.

To complement physician performance reports, health plans need to provide actionable information to help providers identify ways to improve their cost and quality scores. “It’s not very helpful to give a physician a ‘score’ and not provide an explanation of how the score was calculated or how it can be improved,” explains Michael Cousins, Senior Consultant for Reden & Anders, an Ingenix company.

For example, providers may be able to improve their cost and quality scores by prescribing less expensive generic drugs.  As such, the health plan could provide physicians a list of generic substitutes for more costly brand name drugs. A treatment checklist may help providers better follow evidence-based guidelines for chronic conditions like diabetes or high blood pressure, thus improving quality scores.  Health plans must be sure that all evidence-based information and advice comes from credible sources like the American Medical Association, American Academy of Family Physicians, and other organizations respected by the provider community.

Planning for reconsideration and disputes

While provider reports aim to provide as much transparency as possible, disputes from physicians are inevitable under a P4P program. Health plans should build reconsideration processes that allow providers to submit supplementary information on the care provided to patients. Providers should also be able to demonstrate compliance with care standards. Offering providers the means to respond to scores encourages participation and increases the likelihood of buy-in, and success, of a P4P program.

Program monitoring and evaluation

To deliver maximum value, P4P programs require ongoing tailoring and development. “Health plans should evaluate the effectiveness of their P4P programs at least on an annual basis and make adjustments as needed,” says Cousins.

Effective P4P programs continually improve the quality of health care delivered by providers. “Systematic feedback cycles, can be applied to improve health care,” says Cousins. “We can create a system that continues to learn, improve and reduce unwarranted variation.”

Program design

Effective program design provides the structure to support the data analysis, measurement, reporting, communication and ongoing evaluation of P4P programs. Every health plan serves unique patient and provider populations –P4P programs should be tailored to suit those needs.  “Having the right analytic and reporting tools is necessary, but not sufficient to comprise a comprehensive program.” Cousins adds, “A total solution requires clinical and operational expertise, and capabilities beyond data analysis.”

Capabilities like optimizing the alignment of payment systems with provider performance. Cousins says, “We know that payments under a P4P program can be better aligned with the goals of ‘better medicine’. Many physician payment systems are based on a composite, or aggregate, score. But the number and types of measures aggregated to form one score, and the weight that each individual measure receives, hasn't benefited from rigorous study or in-depth field studies.”

This kind of expertise helps health plans design P4P programs targeted at key areas of improvement. Says Cousins, “When thinking about program design, we’re trying to understand what needs to be fixed. We look for unwarranted variation in health care services, including misuse, under-use or over-use of services.”

Delivering on the promise

Pay-for-performance is growing nationwide, but its promise is not fully realized. Implementing an effective P4P program is a large and complex challenge that requires sophisticated data aggregation and analysis, establishing valid measures and scoring, developing clear channels of communication between health plans and providers, and ongoing program assessment, all supported by thoughtful program design.

Dr. Celebi asserts, “P4P programs definitely have the potential to improve quality of care and lower costs. Successful P4P programs will differentiate based on their ability improve outcomes for patients.”

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