Paying for Quality in Integrated Health Systems

1. Paying for Quality in Integrated Health Systems Douglas Conrad, PhD Barry Saver, MD, MPH Beverly Court, MHA Sarah Heath, MA University of Washington Funded by the Center for Health Management Research QualityIncentivesJune-7-2004

2. Participating CHMR Study Systems • Catholic Health Initiatives • Exempla Healthcare • Sharp Healthcare • Summa Health System • Sutter Health • Swedish Health System • Trinity Health System • Veterans Health Administration (VISN 23) • Virginia Mason Health System • Washington Hospital Healthcare System QualityIncentivesJune-7-2004

3. Surveys & Key Informant Interviews • 22 medical groups • 6 IPAs • 10 major system hospitals • Interviews included: • medical group administrator and medical director • IPA administrator and medical director • Hospital CEO, CNO, & CMO • Interviews focused on environmental and market forces, quality incentives, and QI initiatives QualityIncentivesJune-7-2004

4. Findings – Experience with Quality Measures & Incentives • Little incentive experience (median bonus income [quality and other] <1% of total revenue); P4P just starting in CA, no $ received yet • Past/current incentive programs generally ineffective - small incentives, often “black box” quality measures, no consistency across plans • Current public (e.g., web-based) reports viewed skeptically – often black box measures, data sources often unknown or inaccurate • Organizations debate whether to publicize or ignore when get good ratings QualityIncentivesJune-7-2004

5. Findings – Views about External Quality Measures • Quality measures must be transparent – clear, measurable, meaningful • Quality measures need to fit organizational priorities for quality • Need to be consistent across plans – even P4P consistency may not be enough • External incentives must align with internal incentives QualityIncentivesJune-7-2004

6. Findings – Views about External Financial Incentives • If substantial resources needed to measure or achieve goals, incentives have to be “big enough” • Some question the appropriateness of financial incentives for quality – “We aren’t paying you to deliver poor quality, so why should we have to pay you more to do it the right way?” • Financial stability a prerequisite for considering major changes, particularly large investments such as an EMR QualityIncentivesJune-7-2004

7. Findings – Views about Internal Financial Incentives • Cultures of most large organizations rely on intrinsic motivation – many leaders question need for/appropriateness of large provider incentives • Small groups (e.g., IPA members) tend to feel significant financial incentives needed to change provider behavior • Productivity payment a barrier to quality incentives • Internal measures/incentives must be transparent, data accurate and timely QualityIncentivesJune-7-2004

8. Findings – Organizational Factors • Leadership is critical • Teamwork & collaboration drive quality • Affiliation with a large organization facilitates quality improvement – “deep pockets” for infrastructure investments, organizational culture • Some IPAs trying to function as large groups – e.g., create culture, centralize QI – but significant barriers exist • Hospital and medical group efforts often not coordinated, even where incentives are aligned QualityIncentivesJune-7-2004

9. Implications: “Design Principles” for Quality Incentives • Transparency (measurability, legitimacy and clinical coherence) of quality metrics is crucial to success • Consider where to use relative vs. absolute measures • Align rewards on multiple dimensions: structure, process, and outcome • Emphasize processes under provider control QualityIncentivesJune-7-2004

10. Incentive Design Principles (concluding) • Design incentives to reward teamwork • Quality is a “team sport” • Balance financial incentives as “extrinsic” motivators with attention to “intrinsic” motivators • Use “channeling” mechanisms to enhance quality competition & quality-elasticity of demand QualityIncentivesJune-7-2004