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Rewarding Provider Performance: Aligning Incentives in Medicare
was mandated by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. The project focuses on small and medium-sized physician practices, and promotes the use of health information technologies to improve care for the chronically ill. The same act also mandated several disease management projects that often make vendor fees dependent on proven savings.
CMS is currently running several other demonstrations that include projects related to dialysis facilities, nursing homes, and chronic care (CMS, 2006a). While the demonstrations are impressive in number and variety and may yield valuable insights, demonstration projects in and of themselves may not generate large changes in the health care system since they tend to be short-lived, end with isolated reports to Congress, and do not necessarily lead to specific follow-up activities.
Aside from these specific efforts, it is important to note that CMS is actively collaborating with the Ambulatory care Quality Alliance and the Hospital Quality Alliance on pay-for-performance strategies. This type of collaboration is key to the success of pay for performance, not only for the improvement of individual programs through shared learning, but also for the success of pay for performance on a larger level through alignment of incentives, decreased confusion associated with multiple requirements, and synergism among the multiple efforts under way.
In the past several years, numerous employers, purchasing coalitions, and health plans have announced new efforts to reward health care quality. Estimates suggest that more than 100 individual pay-for-performance efforts are currently under way (Med-Vantage Inc., 2006). These programs vary in the number and types (e.g., process or outcome) of quality indicators used, the clinical conditions targeted, the magnitude of the incentives and how they are structured (e.g., as a competition in which only the top providers receive a bonus or as an award based on performance relative to a common benchmark), and whether the program applies to a large or small share of a provider’s patients. Several examples are described below to illustrate the diversity of approaches.
In California, seven health plans are coordinating pay-for-performance programs under the auspices of the Integrated Healthcare Association (IHA), a multistakeholder coalition (www.iha.org). The seven plans consist of 225 physician groups representing about 35,000 physicians treating 6.2 million patients (IHA, 2006a). Bonuses are awarded to large, multispecialty physician groups based on clinical process measures from the Health Plan Employer Data and Information Set (HEDIS), patient experiences of care,