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Calif. pay-for-performance program gets mixed reviews

America's largest P4P plan is encouraging more health IT investment, but quality improvements are modest. Doctors say bonuses are too small.

By Kevin B. O’Reilly — Posted April 2, 2009

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Scores of competing pay-for-performance programs using uncoordinated sets of quality measures have made it hard for physicians to earn health plan incentive payments and yielded little in the way of better patient care.

That is why hopes were high for the Integrated Healthcare Assn., a California quality collaborative whose P4P program drew the cooperation of the state's seven largest HMOs and 225 medical groups representing 35,000 physicians. The health plans aggregated their data to capture physician performance more accurately, and everyone agreed on a common set of quality metrics.

From 2004 to 2007, IHA -- operating the country's biggest P4P program -- paid out $203 million in bonus payments. But the quality breakthrough many expected has yet to arrive, according to a study in the March/April issue of Health Affairs, a leading policy journal (link).

The P4P plan was unable to help HMOs meet the National Committee for Quality Assurance's 90th percentile benchmark on Healthcare Effectiveness and Data Information Set measures in primary care areas ranging from breast cancer screening to cholesterol management.

"Pay-for-performance alone is not going to get us to where we can close this gap," said Cheryl L. Damberg, PhD, lead author of the study and senior policy researcher at RAND Corp. "Physicians need other support mechanisms."

In 2005, the American Medical Association adopted principles stating that pay-for-performance programs should be voluntary; not reduce reimbursement; and use physician-developed quality metrics, accurate data and scientifically valid analytical methodology.

As part of the study, Damberg and colleagues interviewed representatives from 35 physician groups and seven health plans. Doctors said pay-for-performance led them to invest in health IT to better measure their own quality performance but added that annual bonuses ranging from $1,700 to $8,500 were too small to pay for top-to-bottom changes. On a 5-point scale, doctors rated it a 4.

HMO executives, on the other hand, gave the program a 2.5 rating. They complained that quality improvements were not big enough and that hoped-for cost savings failed to materialize.

IHA Executive Director Tom Williams called the results an encouraging first step.

"We would like to see more improvements, at least in clinical quality and patient experience," Williams said. "But it's all going in the right direction, and the main thing is that physicians like the elements of the program and have really responded favorably to it."

Annual reports on the IHA program are available at the group's Web site (link).

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