Pay-for-Performance

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Medicare Physician Payment Adjustments

November 21, 2011 in Healthcare IT, Medicare, P4P, Physician Compensation, Quality | No comments

The Medicare billing system is complex.  There an alphabet soup of acronyms, (e.g., RVUs, CPT, HCPCS, GPCI) and each of these affects payments in different ways.  In addition to the standard payment terms, Medicare is also creating additional payment incentives.  These payment incentives fall into three broad categories:

  • Quality reporting
  • e-Prescribing (eRx)
  • Electronic Health Records (EHR)

CMS’s Physician Quality Reporting System (PQRS) allows physicians to report the quality of care their patients receive. Physicians can report PQRS measures through claims, registries, or EHR systems.  To incentivize physician participation in the PQRS, CMS has adopted incentive payments.  In 2012-2014, Physicians who meet the PQRS participation requirements will receive a 0.5 percent payment bonus.  In 2015 through 2017, however, who do not submit a sufficient number of PQRS measures actually will receive a payment reduction.

In addition to the PQRS incentive, beginning 2012, Medicare eligible professionals who are not successful electronic prescribers under the eRx Incentive Program to a payment adjustment. This payment adjustment applies to all of the eligible professional’s Part B-covered professional services under the Medicare Physician Fee Schedule (MPFS). From 2012 through 2014, the payment adjustment will increase with each new reporting period. Accordingly, for 2012, eligible professionals receiving a payment adjustment will be paid 1.0% less than the Medicare Physician Fee Schedule (MPFS) amount for that service. In 2013 and 2014, the payment adjustment increases to 1.5% and 2.0% respectively.

A table summarizing these incentive payments is below.

Year PQRS eRx
Incentive Payment MOC Incentive Sucessful
2011 1.0% 0.5% 1% N/A
2012 0.5% 0.5% 1% -1%
2013 0.5% 0.5% 0.5% -0.5%
2014 0.5% 0.5% N/A -2%
2015 -1.5% N/A N/A N/A
2016 -2.0% N/A N/A N/A
2017 -2.0% N/A N/A N/A

CMS also offers physicians incentive payments to adopt EHR.  Incentive payments can be as high as $18,000 per year or $44,000 over a five year period.

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Does the Frequency of P4P Evaluations affect Performance?

December 2, 2010 in P4P, Quality | 2 comments

“Reinforcement theory from psychology literature suggests that changing behavior by incentives is easiest when the linkage between behavior and incentive (or positive reinforcer) is clearest, and the reinforcers are placed in routine. “  Does that mean that more frequent P4P evaluations and payments are optimal?  More frequent physician performance payments increase administrative cost, but may be worthwhile if this quality measure system improves performance.

A paper by Chung et al. (2010) aims to verify if physicians respond better to more frequent incentives.  The authors randomized assign physicians at the Palo Alto Medical Clinic (PAMC) of the Palo Alto Medical Foundation (PAMF) to two groups.  The first group received quarterly P4P bonuses and the second group received annual P4P bonuses.  Both groups, however, received reports evaluating their performance on a quarterly basis.

The authors found no difference between the quarterly and annual payments.  One could explain these findings a number of ways.  First, it could be the case the the frequency of payment does not matter.  On the other hand, it could be that the frequency of payment matters, but the change in physician performance over time was so small that the payments themselves had little effect.  For instance, if factors such as patient adherence matter more than physician actions, then the frequency of P4P payments will matter little.  It could also be the case that it is not the frequency of payment that matters, but the frequency of reporting.  Finally, the reporting could be too high level.  If physicians receive insufficient detail of how they performed at a patient level, it will be difficult for them to understand why they received the score they did.  Thus, although this study finds that payment frequency does not affect performance, I remain unconvinced that payment and/or reporting frequency does not affect physician responses to quality evaluations.

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Analyzing Physician Efficiency: Per-Capita Scoring

January 18, 2010 in Medicaid/Medicare, P4P, Supply of Medical Services | No comments

How does one evaluate a physician’s efficiency level?  This process has five main dimensions.

  • Which resource use measurement methodology to use. There are two main profiling methodologies: per capita and episode-based.
  • How to account for differences in patient health status. This is done through risk adjustment.  However, choosing the proper risk adjustment method is crucial in order to produce accurate physician scores.
  • How to attribute resource use to physicians. Important attribution decisions include whether to assign a patient’s resource use: i) to the single physician who bears the greatest responsibility for the resource use, ii) to all physicians who bore any responsibility, or iii)  to all physicians who met a given threshold of responsibility.
  • What benchmark(s) to use. Should the benchmarks be evidence-based, set relative to peers, or established by consensus through organizations such as the National Quality Forum.
  • How to determine what is a sufficient sample size to ensure meaningful comparisons. This sample size can vary on two dimensions: i) the availability of enough data on each physician to compute a resource use measure and ii) a sufficient number of physicians to provide meaningful comparisons.

The GAO has a report analyzing whether physician resource utilization per-capita is stable over time.  The report looks at 4 specialties [cardiology, diagnostic radiology, internal medicine, and orthopedic surgery] in 4 metro areas [Miami, Phoenix, Pittsburgh, and Sacramento].  The data used include: (1) Medicare claims files; (2) Denominator File, a database that contains enrollment and entitlement status information for all Medicare beneficiaries in a given year; (3) Hierarchical Condition Category (HCC) files that summarize Medicare beneficiaries’ diagnoses; (4) files summarizing the institutional status of beneficiaries; and (5) Unique Physician Identification Number Directory, which contains information on physicians’ specialties.

Below are the specifications the GAO report uses to create physician scores.

  • Physician resource utilization is constructed on a per-capita basis.
  • Risk adjustment is constructed using Hierarchical Condition Categories (HCCs).  The risk adjustment model uses the same 70 HCCs as the model CMS uses to set managed care capitation rates.
  • Attribution is given to the physician with the highest Evaluation and Management (E&M) cost for each beneficiary [except for diagnostic radiology where the physician with the most Part B costs was attributed the individual’s annual cost].  However, very little of each individual’s annual cost was accounted for by the attributed physician.  Institutional services accounted for 54 percent of expenditures. On the other hand, “services provided by a particular physician in our study directly to that physician’s patients accounted for only 2 percent of total expenditures or about $350 for each beneficiary in a physician’s practice.  All other services—those provided by other physicians, home health care, hospice care, outpatient services, and durable medical equipment—accounted for the remaining 44 percent of expenditures.”
  • The benchmarks used was cost relative to one’s peers.  The report acknowledges that quality metrics should also be incorporated in the evaluation.  However, since there are few established quality metrics for most specialties, the potential for quality evaluation at this point is limited.
  • For the sample size, the GAO required physicians to have treated at least 100 Medicare patients each year in the study.  The meant that 28% of physicians were excluded from the sample in 2005 and 29% were excluded in 2006.

The report finds that “58 percent of physicians and 30 percent of beneficiaries were in the same quintile of resource use in 2005 and 2006. The pattern was even more pronounced for the top resource use quintile: 72 percent of physicians and 35 percent of beneficiaries remained in that quintile. If the level of physicians’ and beneficiaries’ resource use was purely random, only 20 percent would be expected to have remained in the same quintile.”

One important aspect of physician evaluation is whether or not these scores will actually change physician behavior.  The authors review of the literature finds that “feedback alone generally has no more than a moderate influence on physician behavior.”  It is possible, however, because most insurers have a small share of the physician’s business.  Feedback from Medicare, however, may lead to a more significant behavior changes because it is so large.

Also, it likely that disaggregated scores (by patient or by episode type) will have a larger effect on physician behavior than a single overall cost.  The more detail the physician can receive, the more he can learn how to alter his behavior.  In fact, the top five insurers actually provide patient-level detail in addition to the overall physician grade.

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Episode-Based Performance Measures: A reality?

December 15, 2009 in P4P | 2 comments

Pay-for-performance has become very fashionable of late. One way to measure physician performance is with episode groupers. This software groups together some or all of the services related to the care of a patient’s chronic or acute medical conditions. Policymakers can then use the episode as the unit of observation for: feedback on physician performance, public reporting, pay-for-performance, or ‘bundled payments for groups of services. These pay-for-performance measures could offer a significant increase in the scope of quality measures, which currently only evaluate process (e.g., did a heart attack patient receive a beta-blocker).

A paper by Hussey et al. (Health Affairs 2009) looks at the current state of the episode groupers. They note that these groupers are currently being tested in the following settings: (1) Geisinger Health System’s payment for cardiac care episodes; (2) the Medicare Acute Care Episodes (ACE) demonstration,(3) the Medicare Physician Hospital Collaboration demonstration; and (4) PROMETHEUS Payment’s pilot-testing of episode-based payments for several acute and chronic conditions.

One problem with assigning an episode to any individual physician is that Medicare patients are typically treated for many physicians, even within an episode. “Medicare beneficiaries receive care from a median of seven physicians, and the typical primary care physician must coordinate with 229 other physicians working in 117 practices.”

Secondly, it is unclear whether the physician should be the unit of analysis. Poor hospital hygine may be the cause of certain hospital-born infections. Any single physician likely has little input in the overall sanitation level of the hospital. Thus, it is unclear if one should assign an episode to a physician, a physician group, a facility (e.g., hospital) or a larger health care institution.

Finally, many Medicare beneficiaries have co-occurring health events. For instance, beneficiaries had an average of “…eight or more episodes of care during a year, some of which were for interrelated conditions. For example, many beneficiaries who had an AMI also had hypertension (63 percent), CHF (54 percent), or diabetes (35 percent) episodes.”

While episode-based performance measures offer much promise, there are many significant obstacles that need to be overcome before these measures will be able to significantly improve the efficiency of how medical care is delivered today.

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Commentary on P4P

November 16, 2007 in Academic Articles, Physician Compensation | Permalink

I recently read a Health Affairs article analyzing a pay-for-performance (P4P) demonstration. The Local Initiative Rewarding Results (LIRR) demonstration in California involved seven Medicaid-focused health plans in California between 2003 and 2005. Here are some of my most recent thoughts on P4P:

  • The article seemed to show that P4P worked best when there was much consensus over how doctors should treat patients. The irony of P4P is the following: P4P programs with high levels of physician consensus work, but if everyone physician is already acting appropriately P4P does not make a major change in behavior; larger behavioral changes can occur when physicians are greatly deviating from the optimal practice, but in this case it is very difficult to implement P4P.
  • P4P plans are often implemented so those that do well gain income and those that preform poorly maintain their status quo income. When no one loses any money, P4P is supposed to gain more acceptance among physicians. In equilibrium, however, an economist would predict that those with low P4P scores will receive lower wages in the future (or wage increases below inflation) due to P4P.
  • Unsurprisingly, the authors of the Health Affairs paper found that meager financial incentives do not significantly change physician behavior, while larger financial incentives have a greater impact. Also, good communication with physicians helps to increase physician compliance with P4P mandates.
  • If P4P evaluates doctors on care levels which depend on patient compliance, health plans can help physicians to increase the quality of care. For instance in the above study, “many providers used the plan lists of members turning fifteen months old as the basis for outreach…”
  • When P4P financial incentives vary across plans, it is difficult for physicians to focus on specific quality indicators due to complex reimbursement schemes in each plan.
  • When HEDIS scores improve, some of this improvement is due to better quality while much of it may be attributed to better documentation in a patient’s medical records.

Suzanne Felt-Lisk, Gilbert Gimm and Stephanie Peterson (2007) “Making Pay-For-Performance Work In Medicaid” Health Affairs, v26(4) pp. w516-w527.

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EconLog on P4P

November 11, 2007 in Physician Compensation | Permalink

Arnold Kling of the EconLog site has some commentary on P4P when discussing Tim Hartford’s latest book (“The Logic of Life“).

I have a very different approach to compensation. I think that the key is to change compensation schemes frequently. The reason is that any scheme can be gamed, and the longer you wait to change any given scheme, the more effectively the participants will have gamed it. That is one reason I think that “Pay for Performance,” the newest miracle cure for health care costs, will fail miserably. The doctors will be able to run circles around the bureaucrats. In the U.K., they already have–all of a sudden, 91 percent of doctors were receiving bonuses for being above average.

I can’t verify this ’91%’ figure.  Using pre-P4P measure as the measuring stick will lead to many physicians reaching the ‘above average’ mark in the post P4P mark.  Much of this increase is due to better record keeping; some of it is due to better care.

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‘For the first time I found myself truly caught between my own needs and those of my patient.’

October 26, 2007 in Physician Compensation | Permalink

This is how a very interesting article (“P4P is changing me“) in Medical Economics begins. The essay won an award in the 2006 Doctors’ Writing Contest.

The author of the story is a physician who has been under much financial pressure of late; a divorce, med school loans, a mortgage, alimony and child support were all eating away at the author’s income. One day an 84-year old WWII vet walks into his office. He had a left renal mass, but did not want any further medical treatment for this problem. The author must contemplate how–or if–he should treat the patient.

“There’s very little I could do to improve [the patient's] life. I asked him once what I could do to help, and he requested merely that I talk with him. That’s what I’ve done, every three months, but I won’t get any extra pay for that. I could check his A1C, though—after all, he does have diabetes, and it has been more than a year since it’s been checked.“

The patient had been very diligent in maintaining the correct levels of blood pressures, heart rates, and blood sugars. The author believed that an A1C test was clinically unnecessary. But…

We talked for 30 minutes (10 minutes over the scheduled 20-minute appointment); I was then behind. How would I wrap this up? Should I make one last plea that he open himself up to counseling and antidepressants, and not suicide? Or should I tell him that I need him to go to the lab and have his blood work checked? Well, I doubted I could do much to improve his life, but I did need the $50 . . .

Should I start statins on the drooling demented to lower their LDL? Should I preach to paranoid schizophrenics that they must quit smoking? Doing so might help ease my burdens—will it ease theirs? Without a financial incentive, I treated practice guidelines as guidelines, and I treated patients as patients. With financial incentives, will the guidelines become my goal? Will I lose patience for patients who are just a means to my means?

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