Physician Payment and Incentives: The Permanente Medical Group Experience

1. Physician Payment and Incentives:The Permanente Medical Group Experience 2009 ABIM Foundation ForumAugust 4, 2009 Santa Ana Pueblo, New Mexico Francis J. Crosson, MD The Permanente Medical Group (TPMG)and Institute for Health Policy, Kaiser Foundation HP/H

2. TPMG Physician Demographics • 6,067 Physicians • Average age: 45 • 60% Male, 40% Female • 60% Specialty Care • 40% Primary Care • 31% Adult Medicine • Internal Medicine, Family Practice, Ob/Gyn • 9% Pediatric Medicine

3. Physician Payment and Incentives in TPMG • Principles and Values • Methodology • Results • Lessons

4. Principles and Values – The Compensation System Must: • Support the social mission • Recognize a “dual responsibility” • Reflect “group responsibility” • Reward excellent performance at both the aggregate and individual levels • Be transparent in design • Be equitable in application • Support professionalism

5. Methodology • Physicians receive a market-based salary • Incentive at group level consisting of a 5-7% budgeted global shared risk pool with KFHP • Each medical center’s share will vary by performance on quality and service goals • Individual physician incentive payments are determined at the medical center level, based on individual physician performance as assessed by physician leaders • Physician leadership and management expertise are vital • Neither cost nor utilization performance is used in determining medical center or physician performance incentive payments

6. Methodology • Individual Physician Performance Criteria • Quality • Service • Group contribution • Workload 5

7. Results • Quality performance • Resource utilization • Physician satisfaction

8. TOP 25 Nation-wide, 147 of 409 health plans report on all 38 Commercial CCHRI measures. Average Score Range 74.9% - 57.5%

9. KPNC’s Clinical Quality Performance ranks second nationally (Commercial CCHRI). TOP 25 Commercial CCHRI KP Northern California #2 6 KP Health Plans in the Top 25

10. KP-Northern California Hospitals 30-Day Mortality After Acute Heart Attack Group Practice 25 = statistically sig. p<0.01 20 KP THE REST 15 13% 10 8% 5 0 Source: 2002 study by the California Office of Statewide Health Planning and Development (OSHPD) which found that Kaiser Permanente members have a significantly greater chance of survival from heart attacks than non-members. The study, released in February 2002, showed that the survival of heart attack patients at all Kaiser Permanente hospitals was better than the statewide average. Overall mortality was 8 percent versus the statewide average of 12 percent.

11. Variation in Hospital Days in Last Six Months Per Decedent Source: “The Dartmouth Atlas Applied to Kaiser Permanente: Analysis of Variation in Care in End of Life,” Permanente Journal Winter 2008

12. Statin Initiative Market Share: Statins 2007 * Medimpact ** Generic: Lovastatin, Simvastatin, Pravastatin. Brand: Crestor, Lescol, Lipitor, Vytorin, Advicor

13. Rewards Professional Satisfaction: Primary Care Physicians of KP Are Better Supportedin Delivering Quality Care and Service Percent of Physicians Reporting Factors as Affecting Incentive Compensation Percent of Physicians Reporting That Pressure Compromises Care Source: Grumbach, et. al., California Physicians 2002: Practice and Perception

14. 2006 Physician Opinion Survey Information

15. Lessons • Physicians want to be compensated fairly for the work they do, and for their performance, but available quantitative metrics often fail to differentiate important performance differences among professionals engaged in complex clinical care interventions

16. Lessons • Compensation metrics don’t change culture, motivate physicians, or create genuine physician satisfaction – a sound culture and good leadership does • Peer respect in the group setting is as powerful a motivator as money • A prospective/salary based system can mitigate concerns about underutilization and productivity through a design based on appropriate values, transparent performance data, and good management