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Quality incentive programs: How AAPA policy affects you

Robert McNellis, MPH, PA-C

Author’s commentary In March 2005, the AAPA’s Quality Care Committee* submitted a policy paper on quality incentive programs (better known as pay-for-performance) to the House of Delegates. The intent of the policy paper is to inform PAs about the growth of quality incentive programs, identify the important criteria and principles the programs should possess, and consider their positive and negative impact on PAs and the health care system. Ideally, having a better understanding of quality incentive programs will allow PAs to help guide the development and implementation of quality incentive programs.

*The members and staff of the 2004-2005 Quality Care Committee were Lisa Mustone Alexander (chair), Dave Coleman, James Delaney, and Debra Herrmann. Board advisor was Greg Bennett. Staff advisors are Steve Crane and Bob McNellis. Staff member Michael Ellwood worked extensively on the policy paper.

Over the past 2 years, quality incentive programs have gained momentum and increased in scope. The Leapfrog Group has a Web-based compendium of quality incentive programs which contains more than 90 incentive and reward programs targeting consumers, health plans, hospitals, and physicians. Over half of these programs are targeted at physicians and may provide financial and nonfinancial incentives.

The Centers for Medicare and Medicaid Services (CMS) has had quality incentive programs in place for hospitals since 2003. In January 2005, Medicare launched a pilot program in ambulatory settings to evaluate quality incentive programs in 10 large physician practice groups across the country. MedPAC, the advisory group which recommends Medicare policy to Congress, recommended in its March 2005 report that CMS begin to institute broader quality incentive programs for hospitals, home health agencies, and physicians. In August, two bills in Congress specifically targeted new pay-for-performance programs for physicians.

The Senate bill (S. 1356) would create pay-for-performance programs for Medicare providers but would not address the physician reimbursement schedule. The House bill (H.R. 3617) not only introduces pay-for-performance but also completely revamps the current reimbursement formula with payments based on the Medicare Economic Index. Physicians reporting or meeting quality measures would receive full annual updates, while those not reporting or meeting the measures would receive a reduced payment update, so-called “value-based purchasing.” The quality measures and standards are yet to be determined. Many physician groups support pay-for-performance as long as it involves elimination of the sustainable growth rate aspect of physician reimbursement.

This article presents excerpts from the Quality Incentive Programs policy paper that was adopted in May 2005 and offers commentary on what it means to practicing PAs.

AAPA’s policy on quality incentive programs

The American Academy of Physician Assistants encourages continued efforts to promote improvements in patient care. AAPA supports the development of quality incentive programs, often referred to as “pay-for-performance,” when the incentives are based upon achievement of evidence-based clinical benchmarks, patient satisfaction, and the adoption of health information technology.

In addition, AAPA believes that quality incentive programs should include these key principles:

Focus on processes that lead to better patient outcomes
Foster the team approach to care
Offer voluntary practice participation
Use reliable and accurate patient data
Provide feasible and practical reporting
Ensure programs are fair and equitable, accounting for differences in practice settings and population groups.

The tension between health care costs and quality

Commentary The new focus on quality incentive programs follows previously unsuccessful attempts at more comprehensive health care reform in the early 1990s and the managed care movement of the late 1990s. One of the weaknesses of managed care was its major focus on limiting the allocation of health care resources, which led to dissatisfaction on the part of many patients and providers by making it more difficult to obtain some health services. Both reform movements grew out of the exponential growth in health care spending in the United States over the past 20 years. Current estimates are that the United States spends more than $1.7 trillion on health care, over 15% of the gross domestic product. This is twice the per capita average of most industrialized nations.

Large national expenditures on health care are not necessarily detrimental if those expenditures provide high quality care and good health in return. However, many health economists and analysts argue that we do not get the highest quality care for the health dollars spent. Recent reports have documented a high prevalence of medical errors and significant disparities in the quality of care. Data have demonstrated that many institutions and providers do not comply with standards for prevention, diagnosis, and management of disease. Quality incentive programs are the next iteration of health care reforms attempting to both lower cost and improve quality.

Growth of quality incentive programs

Quality incentive programs, known by various terms such as “pay-for-performance” or “pay-for-quality,” are a recent effort by health care purchasers—the government, health plans, and employers—to align health care provider incentives with quality improvement processes and outcomes. All programs share the goal of offering incentives to health care providers to attain and report higher levels of care quality or patient service. Defining quality has been problematic. In 1984, the IOM (Institute of Medicine) had noted that there were 100 definitions of quality. It ultimately adopted this definition of quality and considered health outcomes to be the health status of a person or population in terms of death, disability, disease, dissatisfaction, delays, and dollars spent: “Quality is the degree to which health services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge.”

Over the years, quality improvement efforts have attempted several methods to improve the quality of care, including

Requirements for continuing medical education
Development of clinical practice guidelines
Use of benchmarking and sharing of performance data with providers
Integration of new information and decision support systems
Certification and credentialing of providers.

While some of these methods have been shown to improve quality, most in and of themselves have not.

The failure of other efforts to induce better quality has led to new initiatives focused on using incentives to encourage providers to deliver higher quality care. Quality incentive programs use a mixture of methods to encourage higher quality by combining the use of performance measures, patient data collection, determination of performance targets or benchmarks, and a reward program for meeting or exceeding performance targets. The incentives may be financial or nonfinancial. The most common incentives include

Quality bonuses
Reimbursement at risk
Continuing medical education
Preferred tiering
Reputational incentives.

Several health care purchasers and payers have implemented quality incentive programs. Two notable organizations supporting quality incentives are the Leapfrog Group and CMS. The Leapfrog Group is an initiative that began in 1998 when a group of large employers came together to discuss how they could work together to use the way they purchased health care to have an influence on its quality and affordability. The employers realized they were spending billions of dollars on health care for their employees with no way of assessing its quality or comparing health care providers. A 1999 IOM report on medical errors recommended that large employers provide more market reinforcement for the quality and safety of health care. Leapfrog members together spend $64 billion a year on health care for 34 million people.

The Centers for Medicare and Medicaid Services, the largest federal purchaser of health care, has undertaken demonstration initiatives to pay health care providers for the quality of the care they provide to seniors and persons with disabilities. CMS will assess both quality performance and quality improvement under the demonstration. The quality measures that will be used focus on common chronic illnesses in the Medicare population, including congestive heart failure, coronary artery disease, diabetes mellitus, and hypertension, as well as preventive services, such as influenza and pneumococcal pneumonia vaccines and breast cancer and colorectal cancer screenings. Under the demonstration, physician groups will continue to be paid on a fee-for-service basis. Physician groups will implement care management strategies designed to anticipate patient needs, prevent chronic disease complications and avoidable hospitalizations, and improve quality of care. Depending on how well these strategies work in improving quality and avoiding costly complications, physician groups will be eligible for performance payments.

Overarching criteria for quality incentive programs

Commentary Last July, CMS released a quality improvement roadmap that identifies the major strategies it will pursue to achieve its goal of improving the quality of care. Strategies include paying in a way that supports providers for improving quality and reducing unnecessary costs, using effective electronic health systems, and publishing quality measurements and information.

The Quality Care Committee reviewed the characteristics of many quality incentive programs. It chose to use the term criteria to describe the bare minimum requirements for any pay-for-performance program. If a quality incentive program does not use evidence-based measures, account for patient satisfaction, or utilize health information technology, it is not an appropriate program in the view of the committee.

Quality incentive programs should have three overarching criteria. The incentives should be based upon achievement of evidence-based clinical benchmarks, high patient satisfaction, and the adoption of health information technology.

Evidence-based benchmarks Evidence-based clinical benchmarks for quality incentive programs should be based upon national standards as determined by independent professional societies, health quality organizations, and quality regulatory agencies. The source of quality measures is critical to an effective quality incentive program. Performance measures should be evidence-based, broadly accepted, and clinically relevant. Performance measures are often derived from clinical guidelines and quality measures developed by government agencies (eg, the Agency for Healthcare Research and Quality, the National Institutes of Health, the Centers for Disease Control and Prevention), health quality organizations (eg, the Joint Commission on Accreditation of Health Organizations, the Leapfrog Group, the National Quality Forum, Health Watch), and professional medical societies (eg, the American Academy of Pediatrics, the American College of Obstetricians and Gynecologists, the American Heart Association).

Patient satisfaction Patient satisfaction is an integral element of quality incentive programs. Patient satisfaction measurement was most commonly used to evaluate service improvement efforts by hospitals and larger physician practices, fulfill accreditation requirements of health plans, and calculate financial incentives to providers. Quality incentive programs will place growing pressure on physicians and hospitals to increase the quality of their outcomes, enhance the safety of patients, and lower the cost of care. Integration of patient satisfaction measurements into overall measures of clinical quality will play an important role in reinforcing accountability of health plans, institutions, and practitioners to the patient.

Adoption of information technology Quality incentive programs should encourage and reward adoption of information technology. Health information technology has tremendous potential to improve the quality of health care and facilitate data collection for quality incentive programs. Patient safety is improved through computerized order entry and electronic prescribing. Disease management benefits from electronic health records and clinical information systems. Electronic information allows administration of quality incentive programs to be cost-effective and efficient.

Provider resistance to using health information technology often originates from the cost of the technology, administrative disruptions to patient care, and the lack of standardization. Providers in solo or small practices, as well as those in less affluent locations, are less likely to have access to information technology. Providers have been expected to bear the costs of information technology without a measurable return on investment. All participants in the health care system—providers, patients, and payers—benefit from the implementation of health information technology. Quality incentive programs can facilitate adoption of beneficial health information technology by providing resources and expertise to providers.

Key principles for quality incentive programs

Commentary The term principle is used to describe those ideal attributes of a quality incentive program. A program may not initially have all of the principles, but better programs would include more of the key principles. As noted above, a pay-for-performance program that did not meet all the “overarching criteria”—such as failing to use evidence-based performance measures—would be untenable. However, a program that used evidence-based measures, accounted for patient satisfaction, and encouraged adoption of health information technology but did not foster the team approach to care would be viable, just not ideal. This provides a means for physician assistants to gauge the strengths and weaknesses of various pay-for-performance programs.

Physician assistants should support the development of quality incentive programs that are properly designed to increase the quality of patient care. AAPA believes quality incentive programs should have six key principles.

1. Focus on processes that lead to better patient outcomes Optimal patient outcomes are the goal of quality incentive programs. However, clinical processes associated with better outcomes should be the most common focus of initial performance measurement efforts. Measures of process more accurately determine provider adherence to evidence-based clinical practice standards. Differences in patient populations, case mix, and patient adherence will less easily distort clinical process measurement. The ultimate goal of performance measurement is to advance continuous quality improvement in the delivery of health care. In contrast to outcomes-only measurement, measures of process are more suitable for use with continuous quality improvement processes to achieve better patient care.

2. Foster the team approach to care Quality incentive programs must recognize that the team approach to health care is essential to achieving the highest quality care. The complexity of today’s health care environment and management of disease entities means no one person is able to effectively manage all aspects of patient care. The contributions of various health care professionals are especially necessary in the care of patients with chronic conditions. Improved coordination, consistency, safety, education, patient satisfaction, and health outcomes result from effective team practice. Physician assistants can contribute their considerable experience in team practice to developers of quality incentive programs.

3. Offer voluntary practice participation The goal of many quality incentive programs is to reward the highest performing providers over others. Ideally, programs will be designed to reward all high performers. Regardless of the design, participation should be voluntary. Quality incentive programs should not presume one design fits all practices. Payment systems should continue to reimburse providers whether or not they choose to report outcomes. Innovative quality incentive programs should encourage more practices to participate by helping to reduce administrative costs and assisting practices in adopting information technology. Practices that elect not to enroll in quality incentive programs should continue to strive to provide quality care in their patient populations.

4. Use reliable and accurate patient data Quality incentive programs should use reliable and accurate patient data. Informative and useful performance measurement requires standards for reliability and accuracy. Data will reflect the care and health of patient populations. The selection of patient information to be measured must be relevant to the clinical practice of medicine and patient care outcomes. Incentive programs are the most beneficial when they identify circumstances in which there is variation in optimal and current clinical practice, there is opportunity for significant improvement in patient outcomes, and a proven practice intervention exists to reduce the variation.

Health care providers should participate in the development of the measurement criteria to ensure that they are clinically relevant and reflect the actual clinical services provided. Actual patient records are more detailed and specific than other sources of information. However, other data sources may be used with caution and statistical validation. Patient privacy is a critical concern when extracting data from patient charts. Electronic health information systems will assist with more efficient and consistent collection.

5. Provide feasible and practical reporting Quality incentive programs should provide feasible and practical reporting. Studies show that making performance information public appears to stimulate improvement activities. As the belief grows that public reporting and accountability are the best way to drive improvement in the quality of health care, providers and institutions will have to respond to numerous entities requiring data collection and reporting that use different methodologies, different specifications, and different approaches to how detailed measures should be. This could lead to a very burdensome need to customize measurement and reporting efforts. Providers, institutions, and reporting agencies should work together to ensure that data collection is not unduly burdensome and does indeed reflect differences in quality.

6. Ensure programs are fair and equitable, accounting for differences in practice settings and population groups Quality incentive programs should be designed to take into account the reality of disparities in health care. Organizations that provide care to medically underserved patients should have the same opportunity to achieve high quality scores and incentive bonuses as practices that provide care to the insured and wealthy. In order to ensure that quality incentive programs are fair and equitable, the necessary resources needed to initiate these programs should be provided to all organizations wanting to participate.

Impact on physician assistants

Most PAs believe they are providing the highest quality care they possibly can. However, there are many pressures on all clinicians to do more during patient visits. The health care system itself has created disincentives to provide the highest quality care. Preventable medical errors persist, and there are unexplained differences in health outcomes among different health care institutions and clinicians. There is also significant delay in widespread adoption of many clinical advances proven to deliver superior patient outcomes.

Physician assistants should be expected to share in the benefits that quality incentives give to the practice. Whether this results in more staff, more visit time, or more resources, PAs should be able to take advantage of these incentives to improve the quality of care they deliver. Quality incentive programs will most likely measure and reward performance of practices, not individuals. A portion of provider reimbursement could be placed “at risk” through performance measurement. Physician assistants play an important role in the improvement of their practice’s patient care and quality performance. Quality incentive programs and physician assistant employment agreements should reflect the physician assistant’s contribution to any financial and nonfinancial incentives.

Quality incentive programs will impact physician assistant education and practice. Competency-based physician assistant education will remain critical, as will training in evidence-based clinical practice. Physician assistants will have to be proficient in the use of clinical information systems and other health information technology. Opportunities may arise for physician assistants to become coordinators of disease management processes or quality improvement managers within their practice or institution. Increased emphasis will be placed upon communication and coordination within the health care team. Providing culturally effective care and employing strategies to increase patient adherence will improve patient outcomes. Education in transition management may be necessary to help physician assistants gently persuade some supervising physicians to make the necessary changes in practice. PAs’ satisfaction with their careers in health care can be improved by working towards meaningful goals and by achieving tangible improvements in the health care outcomes of their patients.

Challenges of quality incentive programs

Commentary Many provider groups have focused on reforming reimbursement policy as a solution to the quality problem. The IOM, in its 2001 report Crossing the Quality Chasm: A New Health System for the 21st Century, said: “Even among health professionals motivated to provide the best care possible, the structure of payment incentives may not facilitate the actions needed to systematically improve the quality of care, and may even prevent such actions.” Pay-for-performance is an attempt to restructure payment incentives to improve the quality of care and decrease costs. Measuring and reporting the performance of institutions like hospitals, nursing homes, or health plans has proven useful to administrators, clinicians, and consumers. However, setting standards for individual providers and practices poses a more difficult challenge. Not only are there fewer patient care events, but the differences in outcomes may not be accounted for by factors under the clinician’s control. The impact of quality incentive programs for individual clinicians remains to be seen. However, it is unlikely they will solve the problems of cost and quality in our health care system.

The US health care system is already grappling with 45 million uninsured residents; significant, pervasive, and unrelenting disparities of health status in certain racial, ethnic, and socioeconomic groups; and problems of decreasing access to basic health services by some segments of the population. At best, quality incentive programs will prove to be a temporary fix of a systemic problem facing the US health care system. At worst, quality incentive programs may create disincentives to provide care to the poorest, least well off, and most in need patients.

Although AAPA encourages PAs to be involved in quality improvement efforts, these efforts should always have the long-term goal of improving health broadly. The success of quality incentive programs rests on the thoughtfulness of their design. PAs and all health professionals should be involved in their creation in order to help avoid unintended consequences. Success also depends on the rapid and timely deployment of health information systems, without which the collection and analysis of performance data will not be possible. Finally, despite their growing adoption, quality incentive programs are largely unproven. Ongoing assessment and evaluation of their impact on quality and efficiency will be critical to their success.

READINGS

Institute of Medicine. Crossing the Quality Chasm: A New Health System for the 21st Century. Washington, DC: National Academy Press; 2001.

Institute of Medicine. To Err Is Human: Building a Safer Health System. Washington, DC: National Academy Press; 2000.

Leapfrog Group. Incentive and rewards compendium guide and glossary. Available at: http://ir.leapfroggroup.org/compendium/. Accessed August 16, 2005.

American College of Physicians Health and Public Policy Committee. The Use of Performance Measurements to Improve Physician Quality of Care. American College of Physicians Position Paper. April 19, 2004.

American Academy of Family Physicians. Pay for Performance. AAFP Policy. Adopted 2004.

National Health Care Purchasing Institute Monograph: The Growing Case for Using Physician Incentives to Improve Health Care Quality. December 2001.

Dudley RA, Miller RH, Korenbrot TY, Luft HS. The impact of financial incentives on quality of health care. The Milbank Quarterly. 1998;76(4):511.