PPO offers patient, physician incentives

In a new twist on pay-for-performance plans, Physician Direct, an Oklahoma City-based preferred provider organization, has rolled out a plan that offers financial incentives to both physicians and patients.

The PPO, which has 4,800 physicians and 120 hospitals in Oklahoma, pays doctors up to 30% more for evaluation and management services and 50% more for procedures and surgeries if they participate in its ePPO pay-for-performance program. To receive the higher fees, physicians must agree to follow evidence-based guidelines posted on the Web site of HealthGate Data Corp., Burlington, Mass. The guidelines were developed by Duke University Medical Center, Vanderbilt University Medical Center, Emory University's Woodruff Health Sciences Center and Oregon Health & Science University.

Doctors also must authorize Physician Direct to prescribe "information therapy" to patients on their behalf. Information therapy is defined as Physician Direct mailing a letter directing patients to go to certain Web links to access information relevant specifically to their diagnoses. That will help improve patient-physician communication and patient compliance with treatment plans, said Jeff Greene, CEO of CompOne Services Ltd., a physician billing services and practice management company in Oklahoma City. It owns ePPO, which is both a product and a company.

ePPO's pay-for-performance plan stands out from others because it offers a cash incentive to patients rather than just to physicians, said Beau Carter, senior Health Policy and Strategy Consultant at Med-Vantage, a San Francisco-based consulting and market research firm that focuses on quality bonus initiatives. "There's nothing that I know that is quite like it," Carter said.

Unlike most incentive programs, Physician Direct's ePPO program offers the incentives on a per-claim basis rather than an annual basis. Patients receive rebates on co-payments, but only if their physician participates in the program. That raises the possibility that patients will pressure doctors to join ePPO to lower their out-of-pocket costs.

That's one reason that Physician Direct built a cash incentive for patients into its pay-for-performance plan, said James L. Dempster, the PPO's president.

Any pressure patients bear on physicians to join ePPO won't be any different than the pressure doctors face when deciding whether it makes sense for them to join a health plan's network to have access to a large pool of potential patients, he said.

The Oklahoma State Medical Assn. is familiar with ePPO but does not have an official position on it yet. "We think it's very creative, innovative and has a lot of potential, but right now we're kind of watching to see how it works," said Brian O. Foy, OSMA's executive director.

At this time, Physician Direct has two clients -- CompOne and the city of Duncan, Okla., which is a self-funded insurer -- using the ePPO product, Greene said. The company plans to market the product to self-insured employers, private insurers, PPOs and IPAs outside Oklahoma in 2005, he said.

Med-Vantage has identified about 80 pay-for-performance plans around the country in 2004.

Blue Cross Blue Shield of Michigan and Blue Cross and Blue Shield of Florida became the latest health plans to launch pay-for-performance initiatives rewarding physicians for quality improvements.