In 2002, IH, a managed care organization in upstate New York, initiated a quality incentive project for primary care physicians. The goals of this project were threefold: (1) to improve chronic care treatment for diabetic members, (2) to explore the effectiveness of financial incentives in improving care for this patient population, and (3) to promote the development of office-based systems of care.
This quality incentive project built on the health plan's experience with a more traditional incentive program put in place in 1990. This traditional program provided financial rewards to primary care physicians whose patients met specified targets in areas of access, patient satisfaction, and preventive health care. The diabetic improvement initiative was designed to establish a quality measure for a chronic condition that could be eventually integrated into the traditional program.
From the start, the project team at IH believed that in order to achieve lasting quality improvement in patient care and outcomes, the incentives would need to influence care delivery processes on-site at the physician's office. As a consequence, the team bundled financial incentives with other interventions intended to (1) facilitate the establishment of new routines in the physician's office, (2) educate physicians, and (3) increase communication between physicians and the health plan, among physicians, and between physicians and their patients. Column 1 of lists specific complementary activities undertaken by IH to instigate real behavioral change.
Activities Prescribed by the Incentive Plan
Design of the Reward Program
The design and implementation of incentive programs to financially reward quality of care present many conceptual and operational challenges for physicians and health plans. Conceptually, physicians view quality as emanating from training and licensure, and identify inadequate reimbursement as a major contributor to suboptimal quality. In contrast, health plans seek to uncover underuse, overuse, and misuse of services as the sources of poor quality (themes from the IOM reports) and to utilize marketplace solutions to stimulate quality improvement.
Health plans and physicians also have divergent opinions about how to fund incentive programs. Health plans expect revenues for incentive payments to be generated by reducing unnecessary variation or by reducing payment to poor performing physicians. Physicians view this approach as disingenuous and suspect that the funds will never be available for disbursement. Physicians also are reluctant to support incentive programs that are designed to be budget-neutral and are funded by limiting payment to under-performing physicians.
Even when agreement is reached on these conceptual issues, health plans and providers must achieve consensus on the more operational issues such as what conditions need improvement, corresponding measures of quality, and target improvement levels to be achieved. For example, rewarding physicians for diabetic A1c control at 7.5 or less is a simple and clear goal and, while a stretch for many offices, is a well-accepted measure of quality.
With these thoughts in mind, an IH team created an incentive program that was purposefully disconnected from the ordinary business of reimbursement for health care services delivered to its members. Diabetes was selected because of the documented gaps in treatment, the expected impact of guideline compliance on medical outcomes, and the availability of credible quality measures. The financial incentive took the form of a quality bonus to be paid on an annual basis to physicians scoring above a predetermined target on a composite performance index.
The IH team selected both process and outcome measures of quality to measure performance and combined these into a composite score that was computed at both the individual patient level and the practice level. The specific measures and their weighting in the composite score are listed in . The composite elements were chosen to conform to evidence-based recommendations for diabetic care derived from the American Diabetes Association clinical guideline.
Composite Performance Measures
Outcome or physiologic measures received greater weight in the composite than process measures; this design signalled that the ultimate goal of the program was to improve patient health. Note that all of the process measures chosen were designed to monitor some aspect of the progression of the patient's disease. Interventions such as nutrition counseling, adoption of an exercise program, and compliance with a drug regimen would be likely to improve outcomes. However, patient engagement in these activities is dependent more upon the patient's preferences and less upon the potential actions of the physician, and performance on these measures would be difficult to monitor and verify.
There were two different ways by which a physician could earn a financial reward: by meeting one of two benchmarks, or by posting a 50 percent improvement in the composite score. The composite score of 6.86 reflects a level of best practice for diabetic care and the composite score of 6.23 reflects a level that, while not achieving best practice, requires achievement of one level of physiologic control. The 50 percent improvement target was designed to provide a positive incentive for those practices that achieved substantial improvement but did not meet one of the two performance targets. The performance targets chosen by IH were unlikely to be viewed by physicians as arbitrary since they were computed for a hypothetical physician who employed “best practice” according to the clinical guidelines established by the American Diabetes Association. For reasons of professionalism, physicians whose performance fell below the targets may have been strongly motivated to improve.
There are obviously different ways to achieve the same composite score. From an economic efficiency point of view, this is desirable because it permits physicians to make changes that are least costly to their individual practices. However, measuring physician performance as the average over all patients also permits the physician to focus efforts on some patients (e.g., the easier or healthier patients) and not others (e.g., the more difficult or sicker patients). Note also that the combination of process and outcome measures attenuates the need for precise risk adjustment of the average composite score across practices. For those physicians with patients who have advanced stages of diabetes (and for whom it might be more difficult to achieve performance gains on outcome measures), it is still possible to score highly on the process measures.
Physicians who met the targets or demonstrated significant improvement received a per member per month (PMPM) bonus paid on the total number of the health plan's members in the physician's panel. The levels of financial reward associated with the performance targets are listed in ; the different reward levels for commercial and Medicare patients reflect differences in overall reimbursement for these two product lines. Physicians achieving a score of 6.86 or greater would receive an incentive payment equivalent to a 12 percent increase in PMPM reimbursement. This is true for both fee-for-service and capitated physicians. Actual payments ranged from $3,000 to $12,000 based on panel size and performance.
Schedule of Financial Rewards
In the fall of 2001, 34 primary care physicians from the northern part of Western New York were contacted and informed about the health plan's desire to improve the care of patients with diabetes and that additional compensation would be made to physicians who reached target levels of improvement. Twenty-two of the 34 physicians enrolled in the program and signed an agreement that specified the responsibility of the physician to engage in the activities listed in column 2 of . During the study, one physician retired and the physician who bought the practice elected not to continue in the incentive program, leaving us with a final sample of 21 physicians and 624 diabetic patients. Twelve physicians elected not to participate; their rationale ranged from not wanting to invest the time to simply ignoring the opportunity.
Currently, most clinical offices do not have an efficient method to identify their patients by diagnosis. Based primarily on claims analysis, IH created a registry which included the names of all diabetic patients assigned to each primary care physician in all lines of business including Commercial, Medicare, and Medicaid. The health plan produced a paper registry for each physician; the average number of IH members in each physicians practice was 800 and the average number of diabetic patients per physician was 32. As performance data were accumulated for each patient, it was added to the registry. This registry contained data for all diabetic patients in the practice and promoted practice-based population health management.
In order to dispense rewards, the IH team faced the challenge of collecting detailed performance data from each of the participating physicians three times during the year. They designed an instrument for the physician to record the performance measures for each diabetic patient. This instrument enabled the physician to score performance for each patient and for all diabetics in the practice; it also facilitated comparisons to other practices.
The data collection approach required physicians to do their own chart assessments for individual patients and to self-report these scores; the health plan contributed data analysis, auditing, and reporting. This division of duties was purposefully chosen. The IH program design team thought that having the physicians and their staff immediately involved in the recording and collection of data could generate multiple benefits. First, this method would provide physicians and their staff with a clear understanding of the program and a constant reminder of the performance measures and absolute targets. Second, a logical place to keep track of the performance data at the individual level is in each patient's medical record. Thus, a checklist in the patient's chart would serve as a timely reminder to the physician to schedule the appropriate tests and to engage the patient in conversation about the status of their disease and the patient's progress. Third, the presence of longitudinal performance data in the medical record provided the opportunity and the prompt for physicians to examine trends over time, to hypothesize about determinants of these trends, and to develop strategies for influencing these trends.
Performance data on individual patients were collected three times during the year (baseline, interim, and final) and the reward, when merited, was granted at the end of the year. The baseline score was computed in March of 2002 based on care delivered during the previous 12 months; the interim score was computed in August of 2002 again based on care delivered during the previous 12 months. The final score was computed in January of 2003 based on care delivered during 2002. This schedule enabled physicians to assess patient status three times and to implement two cycles of improvement in the office.
At the end of each measurement period, health plan personnel would gather together a few doctors at a time to review the results. Each physician was provided with his or her own data, along with blinded data for other participating physicians. These meetings facilitated discussions among the physicians about how to improve care for specific patients and, in general, the types of processes used in the office that facilitated improvement across all patients.