How Four Purchasers Designed and Implemented Quality-Based Purchasing Activities

Lessons From the Field (Continued)

Maine Health Management Coalition

Overview of MHMC Organization

The Maine Health Management Coalition is a multi-stakeholder coalition that includes both purchasers and providers of care, representing approximately 150,000 covered lives in the State.

Pathways to Excellence Program

Program developed over several years. MHMC's pay-for-performance initiatives trace back to the work of steering committees that began meeting in 2002. In 2004, MHMC rolled out a financial rewards initiative for all primary care practices in the State. MHMC is also implementing a P4P pilot that includes 10 hospitals, with plans to expand the initiative to other hospitals in the State. Public reporting, which predates the P4P efforts, continues to be an important component of Pathways to Excellence. Consumers who visit MHMC's Web site (www.mhmc.info) can view the performance of PCPs and hospitals in a number of key areas.

Coalition members fund the initiative. During the first year of the physician P4P program in 2004, two employers and one health plan in the Coalition placed a total of $400,000 into a bonus pool. Funding for a 6-month hospital P4P pilot came from both the 10 member hospitals and 9 employers/health plans participating. Each hospital agreed to place 1 percent of the revenue received from the nine payers during the pilot period into a bonus pool as a “performance guarantee.” Each payer agreed to place an additional 1 percent of the payments to the 10 hospitals during that same period into the bonus pool as a “performance bonus.”

Design, Development, and Implementation

Initial Design

Steering committee ensured stakeholder engagement. Because MHMC is a multi-stakeholder coalition that is consensus driven, all parties are at the table. To get the physician initiative up and running, MHMC created a steering committee of 14 individual physicians (representing themselves rather than a medical society). These 14 physicians do represent about 70 percent of the State's doctors through their affiliations with physician-hospital organizations and networks. For the hospital reporting initiative, MHMC engaged the State hospital association, which in turn had to get agreement from all of its 34 members in order to move forward. The hospital P4P pilot was designed collaboratively by voluntarily participating hospitals and employers.

Outside experts assisted with research. The hospital P4P initiative is chaired by a professor at the University of Maine. Similarly, for public reporting of quality information, MHMC employed a national expert in health literacy to balance the medical community's desire for publication of detailed, scientific measures with consumers' desire for very simple, basic ratings. This assistance has been crucial, since MHMC is staffed by only three people.

Coalition coordinated with other payers. MHMC actively works with the three large commercial insurers in the State to coordinate P4P efforts wherever possible. Discussions with payers on how to use MHMC's performance measures is ongoing. Anthem, the largest commercial payer in Maine, used the physician metrics reported by MHMC for its own bonus program in 2004 and paid out approximately $600,000 in bonuses. Another employer used the measures developed by MHMC to decrease the coinsurance percentage for preferred providers.

Quality Measures

Three sets of physician quality measures are used. When the initial discussions around this initiative began, no off-the-shelf programs such as Bridges to Excellence (the pay-for-performance program launched in 2003 by a coalition of employers, health plans, providers, and others) were available, so MHMC had to start from scratch. MHMC uses three sets of measures for its physician pay-for-performance program.

1. Results from an office system survey, which looks at a practice's use of electronic medical records, electronic prescribing, chronic illness registries, formal health assessments, personal action plans, care coordination for patients with chronic illness, and the availability of a set of clinical guidelines within the office.
2. Administrative data, focusing on diabetes Hemoglobin A1c testing, diabetes cholesterol testing, appropriate use of medication for asthma patients, cardiac cholesterol testing, adolescent preventive care visits, and infant wellness visits.
3. Practice-reported data, which include process and outcomes data for diabetes, heart disease, depression, and obesity (for adults) and immunizations, asthma, and obesity (for children).

Physician measures are on the Web. All three sets of measures listed above can be viewed by the public on the MHMC Web site. Data are reported at the practice level.

Four sets of hospital quality measures are used. The measures used for the hospital pay-for-performance program are:

1. Results from patient satisfaction surveys.
2. Patient safety information, including how prescriptions are double-checked, how medicines are given, and how medicines are stored. Results from the Leapfrog Group patient safety survey are also included in this section.
3. A subset of the clinical quality measures endorsed by the National Quality Forum. These are the same measures used by both CMS and JCAHO (Joint Commission on Accreditation of Healthcare Organizations).
4. Efficiency measures.

Hospital measures are posted on the Web. MHMC provides two categories of information related to hospital quality measures on its Web site. It does not report patient satisfaction or efficiency or cost measures.

1. Safe use of medications, including how prescriptions are double-checked, how medicines are given, and how medicines are stored.
2. Clinical measures (the same data available on the CMS Web site for acute myocardial infarction, heart failure, and pneumonia).

Methodology

Data collection

• Physicians
  • The office systems survey was designed by MHMC. (It is not the same as the one used by NCQA [National Committee on Quality Assurance].) CMS is using MHMC's survey as a template for its own initiative. In 2005, physician practices answered the survey through the Web and the results were tabulated by the nonprofit Maine Health Information Center.
  • The clinical quality measures are based on HEDIS-like measures from claims data collected by MHMC.
  • The practice-reported data contain both process and outcome measures. The data collected are in aggregate form (i.e., averages or totals are used). Practices report data to the Maine Health Information Center for tabulation. Auditing is done through spot checks and no risk adjustment occurs.

• Hospitals
  • For patient satisfaction, MHMC is using a survey coordinated by the Maine Hospital Association but will consider migrating to the CAHPS Hospital Survey, which CMS is implementing with hospitals nationwide.
  • Patient safety is assessed using information gathered from Leapfrog, as well as a second survey focused on medication safety conducted by MHMC. Hospitals send their survey results to the Maine Health Information Center for tabulation.
  • Clinical measures are self-reported by hospitals and acquired through Maine's Quality Improvement Organization (QIO).
  • Efficiency measures include average inpatient cost per discharge based on paid dollar data from MHMC's administrative database and outpatient unit cost for a number of diagnoses and procedures. In Maine, hospitals do business almost exclusively on a fee-for-service basis. MHMC is hoping to add a utilization measure to this category.

Nature of the scoring

• Physician scoring. Performance is assessed at the practice level. Bonuses are determined by performance in three categories (office systems, administrative data, and practice-reported data) and number of lives covered. For each category in which a practice performs well, it receives a star. Three-fourths of the bonus pool went to three-star practices; payouts ranged from $1,500 to $20,000 depending on member-months. The remainder of the bonus pool went to two-star practices; these practices received a flat $1,000 bonus. Scoring was modified for the second year of the program based on provider and payer feedback. For example, MHMC asked for data on diabetes outcomes, with optional submission of outcomes on cardiovascular disease, depression, and obesity/body mass index for “extra credit.”
• Hospital scoring. For the pilot, bonuses will be paid out based on a hospital's performance on each measure in the P4P program. Collectively, the measures in patient satisfaction are worth 14 percent of the bonus; patient safety, 30 percent; clinical, 38 percent; and efficiency, 18 percent. A hospital receives its bonus based on the number of measures for which it exceeded the 60th or 90th percentile of other hospitals. To access the performance guarantee (funds put at risk by the hospital), the hospital must surpass the 60th percentile; to access the performance bonus (extra money set aside by the payers), the hospital must surpass the 90th percentile. For the Leapfrog Group's patient safety and clinical quality measures, this comparison is done at the national level; for other measures, the comparison is done at the State level.

Small numbers. Two-thirds of the hospitals in the P4P pilot had insufficient data for some of the CMS-reported clinical measures, so the MHMC steering committee developed a methodology to roll up these measures into aggregate scores at the disease level. In the physician P4P program, the metrics were developed to allow small practices (one to three physicians) to participate as much as possible.

Implementation

High performers. MHMC has chosen not to focus much attention here. MHMC did host a reception for high-performing practices in 2002 that was well received. MHMC also published three-quarter page ads in six regional newspapers and distributed a framed certificate to practices in 2003. The certificate was met with mixed response: some practices said to save the money for the bonus; others proudly display the certificate in their offices.

Timeline. The financial reward component of the physician pay-for-performance initiative started in 2004. The first payout was in 2005. The hospital P4P pilot started in January 2005.

Evaluation

Physician evaluation. At the end of 2005, MHMC sent surveys to all physician practices. The surveys asked physicians if they found the bonus program meaningful and if the bonuses had changed behavior. The positive response from these surveys gave the initiative momentum going into 2006. MHMC has found that many physician practices have applied their bonus money toward quality improvement efforts in addition to rewarding individual physicians and office staff.

Hospital evaluation. During the hospital P4P pilot, a university researcher conducted an opinion survey of all participants, which included questions about how the project has changed provider behavior.

Implementation costs

• Physician costs. It is difficult to quantify administrative costs because much of the work was done in-house, and MHMC received in-kind support from its members and a health plan involved. (The plan did the attribution calculations.) MHMC estimates the value of the time spent by internal staff on the project to be about $20,000. MHMC paid an additional $20,000 to an outside vendor to collect money from employers, get tax identification information from physicians, write the bonus checks, collect tax forms, and handle the accounting.
• Hospital costs. MHMC paid approximately $20,000 to the project manager/analyst who created the P4P algorithm and facilitated the many meetings with hospital Chief Financial Officers. In addition, MHMC estimates the value of the time spent by internal staff to be $15,000: $10,000 in Executive Director time over 2 years and another $5,000 for the data shop. MHMC projects an additional $6,500 in costs for an administrative vendor to collect the money and write the checks to hospitals.

No ROI analysis. MHMC currently has no plans to conduct an ROI analysis. Some of the issues MHMC considered obstacles to measuring ROI include the problem of trying to isolate the effect of P4P, small sample sizes, a limited timeframe since implementation, and a level of discomfort with some of the assumptions used in the ROI calculations done by other organizations.

Lessons Learned

Build trust among stakeholders. MHMC has a long history of bringing purchasers and providers together and believes those relationships were critical for undertaking pay for performance. To get the physician reporting initiative up and running, MHMC created a steering committee of 14 physicians. For the hospital reporting initiative, MHMC engaged the State hospital association, which needed to get agreement from all of its 34 members in order to move forward. Engaging providers in the process of developing the pay-for-performance program and responding to their feedback were important components of MHMC's efforts to develop the initiative.

Take advantage of outside expertise. For public reporting on the Web site, MHMC employed a national expert in health literacy to balance the desire of the medical community to publish detailed, scientific measures with the desire of consumers to see a very simple, basic rating system. This was important assistance because MHMC has a small staff.

Resources

Maine Health Management Coalition: http://www.mhmc.info/

Maine Health Information Center: http://www.mhic.org/results.html

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Hudson Health Plan

Overview of Hudson Health Plan Organization

Hudson Health Plan (HHP) is a prepaid health services plan covering both urban and rural populations in New York State that serves 55,370 enrollees in the Medicaid and SCHIP programs. Primary care is generally capitated, whereas specialty care is paid fee for service.

Market

HHP operates in a market with a number of competing Medicaid plans, including large New York City-based plans that are better funded because of the volume of enrollees in the city. HHP has a 33-percent overall market share among Medicaid/SCHIP managed care enrollees in the six counties in which it operates, although the share varies substantially across counties. There is little history of local collaboration around quality initiatives outside of HHP's own efforts, which include spearheading a pilot project to create a community diabetes registry.

Rewarding Excellence Program

Program has evolved over time. Since 1999, HHP has implemented a series of pay-for-performance programs targeted at physicians (generally primary care practices and community health centers), designed to improve the quality of care. Several condition-specific programs offer payments for every patient who receives high-quality care, and there is also a broader bonus program for overall performance on a set of quality measures that HHP reports to the New York State Department of Health.

These efforts were initiated because the then-new Chief Medical Officer (Jessie Sullivan) perceived the need to engage providers in the plan's efforts to monitor and improve quality. New York State's Quality Assurance Reporting Requirements (QARR) program for managed care plans requires that health plans report quality data (largely HEDIS measures). Efforts to share provider-level data on these same measures seemed to garner little attention from providers, however. The State increased HHP's premium in 2000, providing an opportunity to offer a financial incentive for quality performance. HHP set aside some of this additional money for bonus payments.

Funding sources have changed. Funds are specifically set aside for the bonus program based on budget projections of the difference between the State's payments to the plan (net of operating costs) and contracted rates. In addition, beginning in 2002, the State began giving HHP its own bonus payments based on its QARR performance. These payments now roughly equal the total expense associated with HHP's pay-for-performance programs.

The program costs about $1.3 million. Direct expenses for the program were approximately $1.3 million in 2005. This total includes personnel costs, consulting, awards dinners, and bonus payments. Personnel costs include effort related to helping practices understand deficits and quality improvement. In 2005, the actual payout from the bonus programs was $820,000 out of a potential $1,077,393.

Design, Development, and Implementation

Off-the-shelf programs were not feasible. At the time the program was initiated, there were no programs such as Bridges to Excellence that could be purchased off the shelf. More recently, the plan concluded that Bridges to Excellence would not be feasible to implement because of the high cost to providers of meeting the requirements for certification as well as the small numbers of HHP members in providers' patient panels (rewards are on a per patient basis so the level of reward would be low relative to the cost of certification).

A phased-in approach was used. The program was phased in by adding new areas of emphasis. In the beginning, the reward was for overall performance on measures for which the State was evaluating HHP (QARR). Later, separate bonuses for Pap smears, pediatric immunizations, prenatal/postpartum care, SSI needs assessment, and comprehensive diabetes care were added.

Initial Design

Stakeholder engagement was low at outset. The program was launched without stakeholder engagement. Now, an advisory board reviews the Rewarding Excellence programs. In addition, a quality improvement committee, which includes clinical representatives from the network, reviews measures and reporting formats. Both the distribution of checks (everyone gets a bonus) and the annual awards dinner have appeared to be effective means of engaging providers in the program.

Little research was available at launch of program. HHP's Chief Medical Officer is involved in State, local, and national quality efforts such as the National Quality Forum, so these resources have played a role in the more recent evolution of the program. Because there were few existing models or resources when the program began in 1999, HHP initially consulted only a statistician to help with the mechanics of scoring using the QARR data.

Quality Measures

Quality measures rely on national measures when possible. HHP has tried to use existing, nationally accepted measures when possible. Seven years ago it was more difficult to do so. Selection of clinical areas to address has been driven by HHP's assessment of its own performance and the State's QARR system.

• For QARR, quality measures are largely HEDIS measures drawn from both chart review and administrative data. The individual provider's performance is based on his/her contribution to the plan's performance. For administrative data, this means all the patients assigned to a primary care provider. (HHP requires primary care provider assignment, although referrals are no longer needed.) For chart review data, providers may have few or no observations because sampling is done at the plan level for QARR and additional data collection is not feasible.
• All other programs use process and intermediate outcome (e.g., blood pressure) measures based where possible on HEDIS specifications and adapted as necessary.
• For the diabetes program, four outcome measures are now included: blood pressure, Hemoglobin A1c, LDL (low-density lipoprotein) cholesterol, nephropathy (control or improvement is measured).

Methodology

Financial and nonfinancial incentives. Bonus potential (maximum rather than average awarded) has varied in total magnitude over time. Approximate figures for financial incentives include:

• $1.35 per member per month on a base of $20 per member per month in primary care capitation for overall performance on QARR.
• $50 per appropriate Pap smear specimen collection.
• $100 for each child fully immunized and screened for lead toxicity and tuberculosis or $200 for getting the lead and tuberculosis screens and immunizations on time.
• $100 each for prenatal registration in the first trimester or within 42 days of enrollment plus $100 for a postpartum visit within 21 to 56 days after delivery.
• $50 for each completed Special Needs Assessment form for each SSI enrollee (annual).
• $300 per diabetic member for meeting all the criteria for comprehensive diabetes care.

In addition to direct financial incentives to providers, the program also uses the following:

• Feedback of comparative performance data.
• Reminders sent to patients.
• Reminders sent to physicians (e.g., lists of patients turning 2 in a given quarter for immunization purposes).
• Annual rewards dinner with plaques, clocks, other token gifts.
• Chance at a free lunch for office staff who send in requested medical records needed for the plan's QARR reporting.
• Member incentives for prenatal care, mammograms.

Nature of Scoring.

• For the QARR, providers are ranked for each measure and bonuses are awarded based on the average percentile ranking across all measures. The top performer receives roughly four times the bonus of the lowest-scoring provider (who gets $0.35 per member per month). All providers receive a bonus.
• All other awards are a set fee for each member who receives the recommended care, with no population-based thresholds (e.g., providers are eligible to receive a bonus only if 50 percent of their patients are screened).
• In the diabetes rewards program, the outcome measures (blood pressure, HbA1c, LDL, and nephropathy) are scored based on the level relative to HEDIS-recommended thresholds (e.g., HbA1c <7 or <9, the latter resulting in a smaller bonus than the former) or based on improvement that has been shown to be clinically meaningful (e.g., 10 mmHg reduction in both diastolic and systolic BP; 1 percentage point drop in HbA1c).

Data collection. Data are predominantly from shadow claims (encounter) but also may come from medical records, lab results (electronic data from large vendors such as Quest), and disease registries (for diabetes). Medical records are either pulled and abstracted by HHP staff for larger providers (centers) or requested for smaller providers (incentives for requested records are provided, and office staff who provide complete records are entered into a lottery for lunch).

Benchmarks. State averages are used as benchmarks for QARR (although relative ranking determines the bonus); for other programs, benchmarks are used only for the outcome measures—blood pressure control, Hemoglobin A1c control, etc., for diabetes. Benchmarks for these measures are derived from HEDIS or the clinical literature.

No risk adjustment. There is no risk adjustment of the data for any of the programs.

Small numbers. No method was used to address small numbers. For the QARR program, HHP views the bonus as a way of getting providers engaged in quality improvement rather than a reward for specific behavior. As a result, HHP has designed the program so that all providers (including the worst performers) get a bonus payment.

Implementation

History. The program has evolved over its 7-year history, with changes as program experience dictated. There was no formal pilot. No regulatory approval was needed to implement this effort, nor were there other legal concerns in the view of the sponsors. HHP undertook this effort on its own without collaboration in the market.

Communications with providers and enrollees. Providers receive mailings, reports, and visits from provider relations representatives, who often help troubleshoot poor performance and assist with plans for improvement. Enrollees receive reminders, incentives, and mailings about needed services but not about the provider program or performance. Regulators receive information about the program through oversight functions (part of HEDIS audit as well as Department of Health review).

Evaluation

No formal evaluation. HHP has examined trends in the targeted measures across its programs but not within the context of a formal evaluation. With the addition of the new diabetes program, HHP is becoming more systematic about examining results and will conduct a formal evaluation.

No ROI analysis. HHP has never considered undertaking an ROI analysis. It is unknown whether there are offsetting savings from any quality improvement that has occurred, but it is unlikely given the nature of the quality measures.

Provider reaction. For the most part, the reaction to the program has been positive. Providers like the extra payments and regulators consider them to be good investments in quality.

Unintended consequences. Two physicians have reportedly threatened to dump noncompliant diabetic patients, which is of some concern to the plan.

Lessons Learned

Use a phased-in approach. The Rewarding Excellence program evolved over time and with relatively little collaboration with others in the marketplace. Phasing the program in over time allowed HHP to bring along the providers gradually and help them build capacity for quality improvement.

Start with rewards based on preexisting quality measures. Initially, the program established rewards based on overall performance for New York State's QARR. Today, providers are also eligible for bonuses related to Pap smears, pediatric immunizations, prenatal care, SSI needs assessment, and a comprehensive diabetes care program. By starting with quality measures that providers were already familiar with, HHP was able to ensure providers' comfort level before expanding the program to additional quality measures. Secondarily, the data were already being collected by HHP so there was little additional cost to using the measures for provider incentives.

Communicate frequently with providers to build trust and sustain momentum. Providers receive mailings, reports, and visits from provider relations representatives, who often help troubleshoot poor performance and assist with plans for improvement.

Resources

Hudson Health Plan: http://www.hudsonhealthplan.org/

New York's Quality Assurance Reporting Requirements (QARR): http://www.health.state.ny.us/health_care/managed_care/reports/eqarr/2005/index.htm

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Authors

Meredith B. Rosenthal, Ph.D.
Associate Professor of Health Economics and Policy
Department of Health Policy and Management
Harvard School of Public Health

Joe Camillus, M.B.A., M.P.H.
Deland Fellow in Society & Health
Brigham and Women's Hospital

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References

1. Dudley RA, Frolich A, Robinowitz DL, Talavera JA, Broadhead P, Luft HS. Strategies To Support Quality-based Purchasing; A Review of the Evidence, Summary, Technical Review 10. (Prepared by Stanford-University of California San Francisco Evidence-based Practice Center under Contract No. 290-02-0017). AHRQ Pub. No. 04-P024. Rockville, MD: Agency for Healthcare Research and Quality. 2004.

2. Bishop C. Where are the missing elders? The decline in nursing home use, 1985-1995. Health Aff 1999 July/Aug;18(4):146-55.

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AHRQ Publication No. 07-RG008
Current as of March 2007

Internet Citation:

Rosenthal M.B., Camillus J. How Four Purchasers Designed and Implemented Quality-Based Purchasing Activities: Lessons From the Field. March 2007. Rockville, MD: Agency for Healthcare Research and Quality. http://www.ahrq.gov/qual/qbplessons.htm

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