Pay-for-Performance Jury Still Out

Pay-for-Performance (PFP) is supposed to slow the rise of healthcare costs and improve patient care as defined by quality measures. But what’s the evidence so far? The cost savings are there, but evidence of improved patient outcomes is sketchy.

Insurers and other payers have lauded the effort and cited evidence of cost savings without compromising patient care. But physicians remain skeptical and are not convinced it’s doing their patients any good and may in fact, make their jobs more difficult.

At the heart of the PFP strategy is a different way to pay hospitals and physicians for the services performed for patients. Logistically, the strategy is implemented with programs such as bundled payments. The expectation is that paying one bundled payment for results instead of volume (fee-for-service) will slow the pace of healthcare costs and improve patient care.

It’s been over 20 years since the country’s first PFP programs were started (1992). Those early PFPs were run by local Blues (Blue Cross/Blue Shield) in Illinois and Pennsylvania. For many reasons including passage of the Affordable Care Act (ACA), researchers have started to look back at those early PFPs to see if they lived up to their promise.

Saving Money

Researchers at Medicare and at the private insurers have documented savings from PFPs in the hundreds of millions. And the move to bundled payments is growing. The Center for Medicare and Medicaid Services (CMS) recently announced that it will add roughly 4, 100 providers to the already 2.400 existing providers utilizing bundled payment contracts.

In January 2014, CMS said the program has shown savings in excess of $448 million. CMS also reported that providers with bundled payment programs had significantly lower spending growth relative to Medicare fee-for-service while also exceeding quality reporting requirements.

BCBS reported in early August that it will direct more than $65 billion in medical spending to “value-based care programs.” That amount of spending represents fully one in five Blues reimbursement dollars tied to programs that link quality, outcomes and cost measures.

Blue companies around the country are reporting fewer emergency room visits, hospital admissions and readmissions and other medical interventions. At the same time, the Blues claim there has been measurable improvements in prevention, including better diabetes control and higher rates of screenings and immunizations.

Initial reports from a Blues survey of PFP programs show that they reduced costs by $500 million in 2012. BCBS will survey Blue companies and report findings for 2013 in the fall of 2014.

Patient Outcomes Inconclusive

Unfortunately, patient outcome data is not as rosy as the cost savings data.

Aaron Carroll, M.D., of Indiana University School of Medicine writes on July 28, 2014 in The New Health Care, that we’re seeing disappointingly mixed results of improved patient care. Sometimes, he says, it’s because providers don’t change the way they practice medicine; sometimes it’s because even when they do, outcomes don’t really improve.

“Changing physician behavior is hard. Sure, it’s possible to find a study in the medical literature that shows that pay-for-performance worked in some small way here or there. For instance, a study published last fall found that paying doctors $200 more per patient for hitting certain performance criteria resulted in improvements in care. It found that the rate of recommendations for aspirin or for prescriptions for medications to prevent clotting for people who needed it increased 6% in clinics without pay for performance but 12% in clinics with it.”

Vanishing Improvements

Carroll cited one study in particular which appeared in Health Affairs and looked at the effects of a government partnership with Premier Inc., a national hospital system. That study found that while the improvements seen in 260 hospitals in a pay-for-performance project outpaced those of 780 not in the project, five years later all those differences were gone.

He also points to a similar study in The New England Journal of Medicine that looked at 30-day mortality in the hospitals in the Premier Hospital Quality Incentive Demonstration (PHQID) pay-for-performance program and compared those results with 3, 363 hospitals that weren’t part of a pay-per-performance intervention. “We’re talking about a study of millions of patients taking place over a six-year period in 12 states. Researchers found that 30-day mortality, or the rate at which people died within a month after receiving certain procedures or care, was similar at the start of the study between the two groups, and that the decline in mortality over the next six years was also similar.”

That study by Jha et al. closely approximates CMS’s value-based purchasing program (VBP), which began providing financial incentives to more than 3, 500 hospitals for performance improvement in October 2012. Thus, results from the PHQID may be predictive of the VBP success and instructive about defining performance and achievement goals in the future.

Modest Expectations

After reviewing the study results, the authors counseled that payers (and providers) expectations for improved outcomes from programs like the Premier HQID should “remain modest.”

“Ryan found no evidence that PHQID affected 30-day mortality rates through mid-2006, and this finding was confirmed by Glickman and colleagues for Premier hospitals participating in a disease registry for acute myocardial infarction. In 2006, approximately 80% of HMO-purchaser contracts for over 100, 000 hospitals nationwide included bonus or penalty for performance beginning in 2004. Thus it is unclear what percentage of PHQID and non-premier reporting hospitals had process or care improvement programs in place before the start of the present study in 2003, and readers are left to wonder whether improvement had already been at least partially realized within each group.”

Effective Motivations

“Given the conclusions of these recent publications, the present study encourages us to ask, ‘Are economic incentives the best motivation available to hospital systems for improving performance?’ Biller-Andorno and Lee have suggested that perhaps outcome transparency and non-financial incentive schemes such as performance ranking are sufficient incentives to improve outcomes.”

Drs. Thomas H. Lee and Toby Cosgrove laid out a cocktail of incentives to change physician behavior in a recent Harvard Business Review article, including appealing to their better angels, financial self- interest, respect of colleagues and fear of becoming outliers. If those don’t work, they suggested firing the physician.

Carroll says that some even fear that pay-for-performance could backfire. “Studies in other fields show that offering extrinsic rewards (like financial incentives) can undermine intrinsic motivations (like a desire to help people). Many physicians choose to do what they do because of the latter. It would be a tragedy if pay-for-performance wound up doing more harm than good.”

The English Experience

Another recent study titled, “Long-Term Effect of Hospital Pay for Performance on Mortality in England, ” published in the August 7, 2014 issue of The New England Journal of Medicine, concluded that, “Short-term relative reductions in mortality for conditions linked to financial incentives in hospitals participating in a pay-for-performance program in England were not maintained.”

Akin Demehin, MPH, senior associate director for policy at the American Hospital Association (AHA) in Washington, told MedPage Today (August 6, 2014) that the English study was an interesting one, but “in terms of implications for pay-for-performance here in the U.S., it’s a little tough to draw direct conclusions because the structure of the programs is different and the financing structure in the U.K. is different.”

The Challenge of Measuring Outcomes

In addition, “when you’re looking at outcome measures, they are affected by care provided by hospitals and other providers, but outcomes can also be influenced by a patient’s clinical factors and the kind of communities patients live in, so that makes one-to-one mapping a little more difficult, ” he said.

Nancy Foster, the AHA’s vice president for quality and patient safety policy, told MedPage, “These measures are not perfectly aligned with the outcomes they’re using, and therefore you see somewhat of a muffled impact of the pay-for-performance program.”

Physician Recommendation and Perspective

Jon Tilburt, M.D. of the Mayo Clinic’s Biomedical Ethics Program and Center for the Science of Health Care Delivery said in a 2013 survey of physician attitudes about controlling health care costs, “Physicians feel stuck in a difficult position. Despite their sense of responsibility to address health care costs, physicians consistently express a commitment to the best interests of patients even when it is expensive. Given this finding, we recommend that cost-containment strategies aimed at physician behavior should focus on innovations that not only promote savings but also preserve physicians’ commitment to individual patients.”

Tilburt’s survey also assessed physicians’ attitudes about strategies to constrain health care spending.

Major findings included:

• Most expressed enthusiasm for cost-containment initiatives aimed at improving the quality and efficiency of care, and favored improving conditions for making decisions based upon cumulative medical evidence. For example, 69% were very enthusiastic about promoting chronic disease care coordination, and 63% were very enthusiastic about limiting corporate influence on physician behavior.
• Physicians’ opinions were mixed on making payment changes to control costs. For example, 65% were not enthusiastic about paying a network of practices a fixed, bundled payment for managing all care for a defined population, and 70% were not enthusiastic about eliminating fee-for-service payment models.

A Physician Sentiment Index report put out by athenahealth in 2013 found that most independent physicians were skeptical about models that offer incentives to doctors and hospitals to reduce the cost of care. Surveyed physicians said that shifting reimbursement models away from fee-for-service arrangements would improve quality of care—but most of those same respondents said that these same models would likely hurt profits and make it harder to get paid.

Jury Still Out

So the jury that matters most, the physicians making individual healthcare decisions for individual patients, not populations, is still out on the value of pay-for-performance. If the Mayo survey accurately represents the opinions of most physicians, then saving dollars at the expense of patient care or even at the expense of the physician, isn’t going to cut it.

With 4, 100 providers being added to CMS’ bundled payment experiment next year, we should start seeing some evidence of patient outcomes soon. But physicians aren’t holding their collective breaths.