OCTOBER 18, 2012

Welcome to the Pay for Performance Update eNewsletter
Editor: Philip L. Ronning
This issue sponsored by the Pay for Performance Summit

Medicare's Pay for Performance Effort Begins, Targeting Quality and Readmissions
On October 1st the CMS Value-Based Purchasing Program began. Medicare estimates that $850 million will be reallocated among hospitals under the program. Seventy percent of the formula is based on "process" measures and 30% of the measures in the formula are based patient experience surveys. (Kaiser Health News, October 1, 2012)

Will Pay for Performance Backfire? Insights from Behavioral Economics
An important and oft-cited blog apprears in Health Affairs and comes from Steffie Woolhandler, MD, Dan Ariely, PhD and David Himmelstein, MD. The authors note that researchers have been unable to demonstrate that pay-for-performance programs benefit patients. Behavioral economics, they say, "...challenges the traditional economic view that monetary reward is either the only motivator or is simply additive to intrinsic motivators such as purpose or altruism. Studies have shown that monetary rewards can undermine motivation and worsen performance on cognitively complex and intrinsically rewarding work, suggesting that P4P may backfire." The authors conclude that amid the enthusiasm for P4P programs few have bothered to even consider the fact that it may not work in healthcare. While greed, the motivational trigger in P4P systems, may be good, even Adam Smith, who certainly recognized the power of greed, believed that production required a parallel public service economy driven by social duty. Enhancing intrinsic motivations must be part of any successful improvement process. (Health Affairs, October 11, 2102)

Health Policy Brief: Pay for Performance
Health Affairs and the Robert Wood Johnson Foundation have prepared a brief on Pay-for-Performance. This brief reviews studies that show mixed results form pay-for-performance programs and discusses the need for more research that could help shape more effective pay-for-performance programs in the future. Topics covered include the following: 1) What's the background?, 2) What are the concerns?, and 3) What's next?. (Health Affairs, October 11th, 2012)

Physicians Push Principles, Including Doc-Led Delivery Reforms, for SGR Replacement
A series of principles have been set forth by the American Medical Association and more than 100 state and national provider groups they hope will guide the development of a new Medicare payment formula. These principles, found in an October 15th letter to committees in Congress, are focused on improving stability and predictability and support a physician-led delivery system. Physicians are expecting to see payments cut by 27% on January 1, 2013 based upon the Sustainable Growth Rate (SGR) formula. (Inside Health Policy, October 15, 2012)

Children's Hospitals Look to States to Set Up Medicaid ACOs
According to Aimee Ossman, director of policy analysis at the National Association of Children's Hospitals, children's hospital representatives are in the early stages of talking to some states interested in expanding medical home programs, and one option might include CMS paying a greater federal match to states to fund health homes for the first two years to set up infrastructure. She also noted that hospitals in some states, including Ohio and North Carolina, already are working on ACO initiatives that involve Medicaid shared savings. Nationwide Children's Hospital in Columbus, OH, received an innovation grant to add disabled children to its ACO, which has been running for some 15 years, and to help a hospital in Akron start a similar pediatric ACO, said Kelly Kelleher, director of the Center for Innovation in Pediatric Practice at Nationwide. Kelleher went on to say that pediatric ACOs are markedly different from ACOs that serve adults -- most aspects of pediatric care are unique. CMS set the minimum patient group for ACOs at 5,000 but the minimum patient population for pediatric ACOs should probably be around 50,000. (Inside Health Policy, October 11, 2012)

Physician Value-Based Payment Initiative Would Change Medicare Reimbursement
The Physician Value-Based Modifier (VBPM) is an initiative that will begin replacing fee-for-service payments with some type of pay-for-performance model which will have an impact on all physicians including hospitalists. The legislation (2008's Medicare Improvements for Patients and Providers Act and the expansion by the Affordable Care Act of 2010) creating VBPM left the implementation details to CMS. The performance or base period begins next year and details of the implementation are scheduled for release in November 2012. The Physician Quality Reporting System (PQRS) or some modification of it is expected to be the evaluation backbone of the program. The author recommends that interested parties become involved in the rulemaking process. (The Hospitalist, October, 2012)

RGHS Signs Pay-for-Performance Deal with Excellus
Rochester General Health System (RGHS) and Excellus Blue Cross Blue Shield have signed a pay-for-performance agreement that RGHS President and CEO Mark Clement calls a "breakthrough...that will serve as a regional and national model." The contract begins in January 2013 and will be in effect for five years. "Our system and our physicians will assume greater accountability for managing the care and health of more than 110,000 Excellus members," Clement said. Details of the arrangement have not been released but are expected to be built around the episodes of care concept. (Rochester Business Journal, October 10, 2012)

Beyond EHRs: Positioning Hospitals for the Pay-for-Performance Era
Programs such as Medicare's Value-Based Purchasing Program and the Hospital Readmission Reduction Program will add pressure to an already competitive environment for hospitals. Mismanaging small data elements can result in errors that incorrectly identify a performance gap or missed opportunity that may dramatically impact a hospital's ranking or payment. This article emphasizes that "[t]o effectively compete under pay-for-performance models, hospitals will need to implement flexible IT infrastructures that provide the tools necessary to drive improvements in patient outcomes and clinical intelligence reporting." IT infrastructure requirements will go well beyond the EHR including such things as real-time surveillance supporting aggressive continuous quality improvement, expert systems to provide accurate clinical documentation and care coordination, and creation of evidence-based care conducted on patient needs. (Government Health IT, October 9, 2012)

Pay for Performance, Quality of Care and the Revitalization of the False Claims Act
Pay-for-performance programs have many implications, including legal ones. This scholarly paper addresses the increased risks that follow from the failure to comply with regulations and requirements of the False Claims Act, a source of increased exposure for providers. Preparation must be made for the marriage of quality and risk. (Health Matrix: Journal of Law-Medicine, March 2009)

Linking Value Based Purchasing & the Realities of Tracking Care Provider Accountability

(click chart above for full article and chart)

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Keynote Debate: Measurement, Reliability, Public Reporting, Tiering, and Motivating Behavioral Change

Howard Beckman, MD, FACP
University of Rochester School of Medicine

Elizabeth Mitchell
Maine Health Management Coalition

Arnold Milstein, MD, MPH
U.S. Thought Leader, Mercer Health & Benefits

Tom Williams, DrPH, MBA
Integrated Healthcare Association

David S. Joyner, MBA
Integrated Healthcare Association

John L. Adam
Kaiser Permanente Center for Effectiveness and Safety Research