Pay for Performance Doesn't Make Docs Jump and Shout

The value of pay for performance, like much else, is in the eye of the beholder. In a survey of 66 health plans, including Aetna, WellPoint, and Blue Cross Blue Shield plans across the U.S., 56 percent of the insurers said that clinical quality improved in 2008 among physicians participating in pay for performance (P4P) programs. That was a big jump compared with the 37 percent of survey respondents who said quality had improved in 2006. Also, 39 percent of the plans said investment in health IT rose among participating physicians, compared with 14 percent two years earlier.

The survey was conducted by MedVantage, a software firm that serves health insurers, and the Leapfrog Group, a consortium of private and public payers that seeks to make healthcare providers more accountable to the public. Representatives of the two organizations presented initial results of the survey at the national Pay for Performance Summit in San Francisco. They said that P4P payments now average 7 percent of participating doctors’ total compensation, with some programs contributing up to 30 percent of physician compensation. Most P4P programs, they said, are expanding both geographically and in the number of specialties covered.

This rosy scenario contrasts sharply with the picture painted by another new P4P study in Health Affairs. Authored by three RAND researchers and a professor at the University of California, Berkeley, the paper focuses on the P4P program of the Integrated Healthcare Association (IHA) in California. The largest pay-for-performance program in the country, the IHA “experiment,” as the researchers deem it, includes 225 integrated medical groups and independent practice associations encompassing 35,000 physicians. The seven major plans in California participate in the IHA program, and all use the same performance measures. Since they contribute 60 percent, on average, of the physician groups’ revenues, you’d think that they should have a significant impact on quality improvement.

To judge by IHA’s annual report cards on its program, quality has improved since the program began in 2003. But some health plans, as well as physician organizations, said that the reason for much of the apparent quality gains is better data collection. The plans did not feel that the program had led to breakthrough quality improvements, nor had it saved any money.

The researchers also surveyed 33 physician groups. They found that the financial incentives in the P4P program averaged 2 percent or less of group revenues from the plans, or between 1 and 5 percent of an average primary-care physician’s income. That translated into $1,700-$8,500 for the doctors—hardly “worth the trouble,” according to some respondents. Only half of the organizations reported that the IHA bonus dollars were greater than the amount they had spent to comply with the program. The consensus among the groups was that the rewards would have to be raised to the 5-10 percent range to start to move the needle on quality.

The plans responded as you might expect: They said they’d be unlikely to increase the size of the incentives, because they’d gotten only marginal results to date. Instead, they proposed increasing the number of quality measures, adding cost-efficiency metrics, and/or paying for improvement, so that the poorer-performing groups would have some reason to try harder.

The IHA program has had some positive effects, including increasing the focus on quality and motivating some groups to acquire EHRs, the paper said. But the researchers stressed that P4P is still very much an experiment, and it’s unclear whether Medicare or the country as a whole should put more emphasis on P4P.