Health Care and Insurance and Technology

Making the grade: Pay-for-performance system nearing reality for local physicians

March 6, 2006

Central Indiana stands on the leading edge of a national push by health care insurance systems to link doctors' pay with their performance.

The Indiana Health Information Exchange-a not-for-profit collaboration among some of the state's largest health care providers-is developing a program that uses data collected from insurers and care providers to produce quality reports. Those reports then will be sent to doctors and used by the insurers to develop incentive programs for reimbursement.

The goal: Start a system by the end of this year that involves seve r a l central Indiana insurance providers and roughly 700 primary care doctors. Eventually, it will broaden to include specialists and even hospitals. "It's something, to my knowledge, no other community has attempted," said David Kelleher, president of the Indianapolis managed care consulting firm HealthCare Options Inc. "We're going to put some pressure on IHIE."

In doing so, the effort takes on a concept that many say sounds good in theory but comes with obstacles.

Pay for performance involves linking reimbursement to how well a doctor provides care, as measured against established standards.

The idea has been around for years, and has started gaining popularity the past four or five years as health care costs rose dramatically and the focus on quality intensified. "The theory is, if you can improve q u a l i t y, quality will result in lower costs," said Alex Slabosky, CEO of Indi- anapolis-based The HealthCare Group LLC, which owns and operates M-Plan Inc., an HMO.

That creates a "self-generating cycle," according to Dr. David Lee, vice president of Indiana health care management for Anthem Blue Cross and Blue Shield, a subsidiary of Indianapolis-based Well-Point Inc.

That cycle counters the current trend in family medicine toward high patient volumes. Doctors must see a lot of patients each day to cover their overhead or fixed costs and rising medical expenses, according to Dr. Deanna Willis, an assistant professor of family medicine at the Indiana University School of Medicine.

"The idea of pay-for-performance is, 'Give me a little extra revenue and I can spend a little more time with the patient or wrap services around the patient to help take care of something the patient didn't ask for but we know will improve their health,'" she said.

Theoretically, pay-for-performance creates a win-win-win situation for patients, providers and insurers, she said.

Currently, most medicine is paid for on a fee schedule, where the payer renders a set amount per service performed. Attorney Bill Thompson calls that a flawed system and said the alternative is worth exploring.

"It seems to make rational sense to pay someone more based on quality, efficiency and patient safety," said Thompson, a managing partner with the Indianapolis law firm Hall Render Killian Heath & Lyman, which specializes in health care.

Both Anthem and M-Plan, the two largest insurers in Indiana, endorse the IHIE push and the pay-for-performance concept.

Nationally, backers of the concept include the U.S. Centers for Medicare and Medicaid Services, which has run a number of pay-for-performance demonstrations and pilot studies, and President Bush.

"There's a lot of experimenting with this around the country," Slabosky said. "It's still a new concept and there are a lot of projects where people are testing to see if it really works."

Potential potholes

The pay-for-performance idea is by no means a refined concept. Common problems include getting enough patient and insurer involvement to make it worthwhile for the doctor, according to Slabosky.

"It's either difficult for the doctor to work with or he has so few patients it really doesn't matter," he said.

Determining appropriate measurements can be another obstacle. Doctors generally favor a positive incentive, something that adds to cash flow, as opposed to disincentives that lead to punishments such as being dropped from a network, Willis said.

"Improving quality of care is really about partnerships between payers and providers," Willis said. "If a payer is coming at this from a slap-your-hand standpoint, you're never going to get that partnership you need."

Plus, medical standards shade toward gray over black-and-white. Willis noted, for instance, that one pay-for-performance measure requires a doctor to perform a certain test before prescribing antibiotics to treat strep throat.

However, other established guidelines say the test isn't mandatory.

"Finding good measures is really difficult," Willis said.

Then there's the issue of fairness. Electronic medical records make it easier to comply with the checks on care that payfor-performance programs require, said Dr. Kevin Burke, a Jeffersonville doctor and president of the Indiana State Medical Association.

He worries that a country doctor or someone working in a small practice will struggle to afford the technology necessary. He calls his association a "house divided" on the issue.

"I still have more reservations than I have comfort with the concept," he said.

The Indiana plan

Organizers behind the IHIE effort have figured out which standards they want to use, and they built a plan to gather the data. Now they need the participants.

The discussion about a community-wide plan for central Indiana began a couple of years ago within the Employers' Forum of Indiana, which Kelleher's HealthCare Options manages. The forum started in 2001 with a group of employers looking to improve the value received for their health care expenditures.

For the reports, they decided to use quality measures that come with clear, evidence-based links and that have been endorsed by reputable national organizations like the National Quality Forum, according to Kelleher.

The pay-for-performance review will start with pediatricians and practitioners of internal and family medicine. Kelleher said they'd like to add cardiology and orthopedics next year and possibly hospitals after that.

The forum recently sent letters to insurance companies asking for their commitment. Participation counts here. More insurers means greater patient involvement and quality reports that pack more of a punch with harried doctors.

"If you give them a report on a small percentage of their population, it's really hard to get their attention," Kelleher said.

In addition to that, the participating health plans will pick up the tab. It will cost $3 million to start this data-collection system and another $2 million annually to maintain it.

Kelleher said they want data to start flowing into IHIE in the next month. He hopes by late this year the first carriers will issue payments based on performance.

"Now, some people have accused me of having rose-colored glasses," he said with a laugh. "But there's no reason in the world to take the pressure off anybody to get this done as soon as possible.

"It's too important an issue."
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