"Pay-for-quality" pilot project gets high marks

Washington -- When managed care companies or the federal government start putting forward plans to base physician reimbursements on quality measures, doctors often worry they will end up being losers. But a community health plan and the physicians who participate in it think they might have found a way in which everyone can be a winner.

For the past year, the Nashville, Tenn.-based insurer HealthSpring has been running what it calls a "pay-for-quality incentive program" with the Sumner Medical Group, a 15-physician practice in Gallatin, Tenn. By coordinating care for the roughly 1,200 Sumner patients enrolled in HealthSpring's Medicare Advantage program, plan officials hoped to improve patient health outcomes while decreasing overall costs for this population.

To accomplish this, the insurer took a two-pronged approach that it says is unique. It teamed up with disease management firm Healthways in Nashville to provide the doctors with free nursing staff who helped keep track of patients between office visits, issued reminders about appointments and alerted physicians when patient conditions at home appeared to be worsening. At the same time, HealthSpring offered a 20% pay bonus to Sumner physicians who were able to hit certain quality targets.

After only a year, the results are remarkable, said representatives from the medical group, the health plan and the disease management firm. Not only did the Medicare Advantage patients' health outcomes significantly improve, but the physicians received full quality bonuses and the insurer saved money in the long run.

Alton S. King, MD, an internist and the managing partner at Sumner, credited the pilot program's success in part to the fact that the physicians were included in the planning process from the beginning. By seeking physician guidance in marrying the incentive portion of the program with a disease management element that was designed truly to complement rather than to interfere with the provision of patient care, HealthSpring crafted a formula that could win the support and cooperation of doctors, he said.

"In order for the payer to get its best return, it needed to invest something into primary care," he said. "The disease management nurse was a resource that we could not have afforded without their help. The bonus that we received was new money -- it was not a withhold -- and was a real number that physicians could realize."

The health plan shouldered all of the financial risk by fronting the money for the nursing staff and offering a bonus for physician quality performance rather than a penalty for those who did not meet the targets. Still, HealthSpring ended up boosting its profits over the past year largely through a 19% decline in emergency department visits and a 10% drop in hospital admissions. The physician practice's medical-loss ratio, which determines what portion of the insurer's Medicare funding goes toward medical care instead of administrative costs or profit for the plan, decreased from 88% to 77% over the year.

A model for Medicare?

Some doctors working under Dr. King initially were reluctant, citing past experiences in which managed care firms assumed the mantle of quality improvement chiefly as a way to divert dollars from needed primary care.

"I had seen other pay-for-performance programs where they simply come in with a plan to make you reach your outcomes, but then provide no help," said H. Wayne Hooper, MD, a family physician with Sumner Medical Group. "This plan really uses the carrot as opposed to the stick, and it provides a framework for us as doctors, one which enables us to improve patient outcomes."

All parties involved said the program could be applied to other Medicare markets. By providing resources for doctors' offices, financial incentives to embrace disease management and the means to develop more robust patient health records, other Medicare payers could win converts, they said.

As lawmakers and federal officials contemplate a move toward pay-for-performance for federal programs, the Tennessee demonstration could provide some keen insights, said Tom Williams, executive director of the Integrated Health Assn., a California-based nonprofit health leadership group and one of the pilot's advisers.

"Outside of CMS demonstration projects for the Medicare population, there really is no other pay-for-performance program aimed directly at Medicare patients in the United States," he said. "The HealthSpring program is a great test case for pay-for-performance in Medicare populations, and its success has implications for the rest of the nation."

Although doctors, patients and insurance officials all appeared to come out winners in this program, more work is required, participants said.

The next step is to drill down through the data from the past year to find out exactly from where the improved health outcomes and cost savings were derived. Dr. King said he suspected most improvements came from better care management of the Medicare Advantage patients who had congestive heart failure and chronic obstructive pulmonary disease but that further study was needed.

HealthSpring will try the pay-for-performance/disease management model in at least 12 of its other markets to see if it can replicate this success. But even if it can, the program will not work for every physician practice that sees Medicare patients.

Robert Stone, executive vice president and chief strategy officer for Healthways, said directing disease management resources specifically toward Medicare patients would not be the most appropriate path for some typical practices unless the firm is already providing its services to a broader range of patients in the medical group.

The pay-for-performance element of the program also might face criticism from physicians who say Medicare should not pay bonuses for hitting high quality marks, saying this is something doctors should be doing in the first place. But Dr. King said the example of his practice shows that many physicians need more resources and better support systems before they can meet the quality guidelines that they know they should be meeting.