Quality and Incentives: Value-Based Purchasing, Pay for Performance and Transparency

1. Tom Williams Executive Director Integrated Healthcare Association The Quality Colloquium Quality and Incentives: Value-Based Purchasing, Pay for Performance and Transparency August 20, 2008

2. National Leadership • HHS Secretary Leavitt inspired Executive Order 13410 • Four cornerstone goals - Interoperable Health IT - Transparency of Quality Measurements - Transparency of Pricing Information - Promoting Quality & Efficiency of Care • Ultimate Goal: “A Change in Culture”

3. Source: The New Yorker, March 17, 2008 3

4. IHA Sponsored California Pay for Performance (P4P) Program Health Plans: Aetna Blue Cross Blue Shield Western Health Advantage Medical Group and IPAs: 230 groups 35,000 physicians • CIGNA • Health Net of CA • Kaiser* • Pacificare/United 12 million HMO commercial enrollees * Kaiser participates in the public reporting only 4

5. California Pay for Performance: Summary of Performance Results Clinical: continued modest improvement on most measures 5.1 to 12.4 percentage point increases since inception of measure Patient experience: scores remain stable but show no improvement IT-Enabled Systemness: most IT measures are improving Almost two-thirds of physician groups demonstrated some IT capability Almost one-third of physician groups demonstrated robust care management processes Continued performance improvements but “breakthrough” point not achieved yet. 5

6. Lesson Wide variation across regions exists; contributes to overall “mediocre” statewide performance Big gains possible with focused attention on certain regions P4P Response Pay for and recognize improvement (20% of payment for 2007) More fundamental change in calculus of payment for improvement for 2008/09 California Pay for Performance: Regional Variability in Quality

7. Top Performing Groups MY 2006 Results by Region California Pay for Performance: Clinical Performance Variation

8. California Pay for Performance:A Tale of Two Regions Inland EmpireBay Area PCPs/100K Pop. 53 116 % Pop. Medi-Cal 17% 12% % Hispanic 43% 21% Per Capita Income $ 21,733 $ 39,048

9. California Pay for Performance:A Tale of Two Regions Clinical Performance P4P Performance Score

10. Are Quality Variations Correlated with Physician Reimbursement Disparities? The data and subjective experience suggest: Physicians in geographies with low socioeconomics receive disproportionately lower reimbursement across their practice, resulting in diminished physician and organizational capacity, reducing both access and quality of healthcare, even in a uniformly, well-insured population.

11. P4P Quality Payment Incentives • Fundamental reimbursement disparities appear to be the main culprit; however P4P should at a minimum not increase reimbursement disparities • Payment for absolute and relative performanceshould be balanced with payment for improvement

12. Paying for Improvement Survey Response: What % of total bonus payments by health plans should be allocated to improvement vs. relative performance? (n=200, IHA Stakeholders meeting, 10/4/07)

13. Paying for Performance & Improvement Excerpt from CMS Hospital Value-Based Purchasing Listening Session #2, April 12, 2007

14. Transparency – Public Reporting www.opa.ca.gov 14

15. Transparency – Public Reporting California General Public Survey, conducted by Harris Interactive (12/07)

16. Transparency – Quality Improvement Rates for Hip Revisions • Total hip revision rates (2006): • National average: 18% • Kaiser Permanente: 12.8% • Sweden: 7% Does this reflect more aggressive treatment, or less effective care? Slide attributed to Thomas Barber, MD, Permanente Medical Group, presented at the CAHP conference, October 2006.

17. Transparency – Quality Improvement Countries with National Joint Replacement Registries • 1975: Sweden- Knees • 1975: Sweden-Hips • 1980: Finland • 1987: Norway • 1995: Denmark • 1997: Germany • 1999: New Zealand, Australia • 2001: Canada, Romania • 2003: England, Wales, Slovakia • 2004: Switzerland

18. Transparency – Quality Improvement Why doesn’t the U.S. have mandatory device registries?

19. Cost and Quality Healthcare as Percentage of GDP • 60%+ of NME passes through public sector budgets (CMS, public employees, tax breaks, etc.) • Healthcare at 16.3% of GDP (2007) • Therefore, about 10% of GDP is healthcare spend passing through public sector budgets (.6 x 16.3% = 9.8%)

20. Cost and Quality Healthcare as Percentage of GDP • Total tax revenues in U.S. (federal, state, local) equals about 28% of GDP • So, healthcare uses about 1/3 of public sector budgets (.098/28% = 35%) and growing! • Healthcare at 20% of GDP = 43% of public sector budgets

21. Cost and Quality Example: Michigan “Checklist”: • Over 18 months, reduced infections in ICU by 66% • Estimated 1,500 lives saved • Estimated $100 million saved

22. California Pay for Performance For more information: www.iha.org (510) 208-1740 Pay for Performance has been supported by major grants from the California Health Care Foundation