Pathways to Quality Health Care
REWARDING PROVIDER PERFORMANCE
Aligning Incentives in Medicare
THE NATIONAL ACADEMIES PRESS
Washington, D.C.
www.nap.edu
THE NATIONAL ACADEMIES PRESS
500 Fifth Street, N.W. Washington, DC 20001
NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance.
This study was supported by Contract No. HHSM-500-2004-00005C between the National Academy of Sciences and U.S. Department of Health and Human Services through the Centers for Medicare and Medicaid Services. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the organizations or agencies that provided support for this project.
Library of Congress Cataloging-in-Publication Data
Rewarding provider performance : aligning incentives in Medicare / Committee on Redesigning Health Insurance Performance Measures, Payment, and Performance Improvement Programs, Board on Health Care Services.
p. ; cm. — (Pathways to quality health care)
Includes bibliographical references and index.
ISBN-13: 978-0-309-10216-2 (hardback)
ISBN-10: 0-309-10216-2 (hardback)
1. Medicare—Finance. 2. Medicare—Quality control. 3. Medicare—Administration. 4. Incentive awards—United States. 5. Performance awards—United States. 6. Medical care—United States—Quality control. I. Institute of Medicine (U.S.). Committee on Redesigning Health Insurance Performance Measures, Payment, and Performance Improvement Programs. II. Series.
[DNLM: 1. Reimbursement, Incentive—organization & administration—United States. 2. Medicare—organization & administration. 3. Quality Assurance, Health Care—economics—United States. 4. Quality Assurance, Health Care—methods—United States. WT 31 R454 2007]
RA412.3.R49 2007
368.4′2600973—dc22
2006033904
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COMMITTEE ON REDESIGNING HEALTH INSURANCE PERFORMANCE MEASURES, PAYMENT, AND PERFORMANCE IMPROVEMENT PROGRAMS
STEVEN A. SCHROEDER (Chair), Distinguished Professor of Health and Health Care,
University of California, San Francisco
BOBBIE BERKOWITZ, Alumni Endowed Professor of Nursing,
Psychosocial and Community Health, University of Washington, Seattle
DONALD M. BERWICK, President and Chief Executive Officer,
Institute for Healthcare Improvement, Cambridge, MA
BRUCE E. BRADLEY, Director,
Health Care Plan Strategy and Public Policy, Health Care Initiatives, General Motors Corporation, Pontiac, MI
JANET M. CORRIGAN,1 President and Chief Executive Officer,
National Quality Forum, Washington, DC
KAREN DAVIS, President,
The Commonwealth Fund, New York
NANCY-ANN MIN DEPARLE, Senior Advisor,
JPMorgan Partners, LLC, Washington, DC
ELLIOTT S. FISHER, Professor of Medicine and Community Family Medicine,
Dartmouth Medical School, Hanover, NH
RICHARD G. FRANK, Margaret T. Morris Professor of Health Economics,
Harvard Medical School, Boston, MA
ROBERT S. GALVIN, Director,
Global Health Care, General Electric Company, Fairfield, CT
DAVID H. GUSTAFSON, Research Professor of Industrial Engineering,
University of Wisconsin, Madison
MARY ANNE KODA-KIMBLE, Professor and Dean,
School of Pharmacy, University of California, San Francisco
ALAN R. NELSON, Special Advisor to the Executive Vice President,
American College of Physicians, Fairfax, VA
NORMAN C. PAYSON, President,
NCP, Inc., Concord, NH
WILLIAM A. PECK, Director,
Center for Health Policy, Washington University School of Medicine, St. Louis, MO
NEIL R. POWE, Professor of Medicine,
Epidemiology and Health Policy and Management, Johns Hopkins University School of Medicine and Johns Hopkins Bloomberg School of Public Health, Baltimore, MD
CHRISTOPHER QUERAM, President and Chief Executive Officer,
Wisconsin Collaborative for Healthcare Quality, Madison
ROBERT D. REISCHAUER, President,
The Urban Institute, Washington, DC
WILLIAM C. RICHARDSON, President Emeritus,
Johns Hopkins University and W.K. Kellogg Foundation, Hickory Corners, MI
CHERYL M. SCOTT, Chief Operating Officer,
Bill and Melinda Gates Foundation, Seattle, WA
STEPHEN M. SHORTELL, Blue Cross of California Distinguished Professor of Health Policy and Management and Dean,
School of Public Health, University of California, Berkeley
SAMUEL O. THIER, Professor of Medicine and Professor of Health Care Policy,
Harvard Medical School, Massachusetts General Hospital, Boston
GAIL R. WILENSKY, Senior Fellow,
Project HOPE, Bethesda, MD
Study Staff
ROSEMARY A. CHALK,2 Project Director
KAREN ADAMS,3 Senior Program Officer, Lead Staff for the Subcommittee on Performance Measurement Evaluation
DIANNE MILLER WOLMAN, Senior Program Officer, Lead Staff on Quality Improvement Organization Program Evaluation
TRACY HARRIS, Program Officer
SAMANTHA CHAO, Senior Health Policy Associate
DANITZA VALDIVIA, Program Associate
MICHELLE BAZEMORE, Senior Program Assistant
Editorial Consultants
RONA BRIERE,
Briere Associates, Inc.
ALISA DECATUR,
Briere Associates, Inc.
Reviewers
This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Research Council’s Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process. We wish to thank the following individuals for their review of this report:
BRUCE BAGLEY, Medical Director for Quality Improvement, American Academy of Family Physicians, Leawood, KS
BRUCE A. BOISSONAULT, President and Chief Executive Officer, Niagara Health Quality Coalition, Williamsville, NY
TROYEN A. BRENNAN, Chief Medical Officer, Aetna, Inc., Hartford, CT
KATHLEEN BUTO, Vice President of Health Policy, Johnson and Johnson, Washington, DC
PAUL B. GINSBURG, President, Center for Studying Health System Change, Washington, DC
EMMETT KEELER, RAND Corporation, Santa Monica, CA
PETER V. LEE, President and Chief Executive Officer, Pacific Business Group on Health, San Francisco, CA
RICARDO MARTINEZ, Executive Vice President of Medical Affairs and Regional Medical Officer, The Schumacher Group, Decatur, GA
ARNOLD MILSTEIN, Mercer Health & Benefits, San Francisco, CA
SAM NUSSBAUM, Executive Vice President and Chief Medical Officer, Anthem Blue Cross Blue Shield, Indianapolis, IN
L. GREGORY PAWLSON, Executive Vice President, National Committee for Quality Assurance, Washington, DC
MICHAEL ROBBINS-ROTHMAN, Senior Consultant, Clinical Systems Improvement, University of Mississippi Medical Center, Jackson
VINOD K. SAHNEY, Senior Vice President and Chief Strategy Officer, Blue Cross Blue Shield of Massachusetts, Boston
CARY SENNETT, Senior Vice President for Research and Development, American Board of Internal Medicine, Philadelphia, PA
KENNETH E. THORPE, Robert W. Woodfruff Professor and Chair of the Department of Health Policy and Management, Emory University, Rollins School of Public Health, Atlanta, GA
Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommendations nor did they see the final draft of the report before its release. The review of this report was overseen by coordinator DONALD M. STEINWACHS, Professor and Chair, Johns Hopkins Bloomberg School of Public Health, Baltimore, MD, and monitor HAROLD C. SOX, Editor, Annals of Internal Medicine, Philadelphia, PA. Appointed by the Institute of Medicine and the National Research Council, they were responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authoring committee and the institution.
Advisory Subcommittees
The authoring committee was assisted by three advisory subcommittees of individuals who brought additional expertise and complementary perspectives to the effort. While the groups were advisory and did not author or sign off on the reports, they did provide advice and in-depth expertise in support of their respective topics. The committee and the Institute of Medicine are grateful to them.
PAY FOR PERFORMANCE
ROBERT D. REISCHAUER (Co-Chair)*
The Urban Institute, Washington, DC
STEPHANIE ALEXANDER
Premier, Inc., Charlotte, NC
CHARLIE D. BAKER
Harvard Pilgrim Health Care, Wellesley, MA
JANET M. CORRIGAN*
National Quality Forum, Washington, DC
KAREN DAVIS*
The Commonwealth Fund, New York, NY
GAIL R. WILENSKY (Co-Chair)*
Project HOPE, Washington, DC
L. GORGON MOORE
University of Rochester, Faculty Practice Plan, Rochester, NY
DEBRA L. NESS
National Partnership for Women and Families, Washington, DC
NEIL R. POWE*
Johns Hopkins University
School of Medicine and Johns Hopkins Bloomberg School of Public Health, Baltimore, MD
ARNOLD M. EPSTEIN
Harvard School of Public Health, Boston, MA
ELLIOTT S. FISHER*
Dartmouth Medical School, Hanover, NH
ROBERT S. GALVIN*
General Electric Company, Fairfield, CT
SAM HO
PacifiCare Health Plans, Cypress, CA
BARBARA B. MANARD
American Association of Homes and Services for the Aging, Washington, DC
CHRISTOPHER QUERAM*
Wisconsin Collaborative for Healthcare Quality, Madison, WI
W. ALLEN SCHAFFER
West Hartford, CT
CHERYL M. SCOTT*
Bill and Melinda Gates Foundation, Seattle, WA
JOHN TOUSSAINT
ThedaCare, Appleton, WI
PERFORMANCE MEASUREMENT
DONALD M. BERWICK (Co-Chair) *
Institute for Healthcare Improvement, Cambridge, MA
PATRICIA A. GABOW
Denver Health and Hospital Authority, Denver, CO
LILLEE GELINAS
VHA, Inc., Irving, TX
MARGARITA P. HURTADO
American Institutes for Research, Silver Spring, MD
GEORGE J. ISHAM
HealthPartners, Inc., Minneapolis, MN
BRENT C. JAMES
Intermountain Health Care, Salt Lake City, UT
ELLIOTT S. FISHER (Co-Chair) *
Dartmouth Medical School, Hanover, NH
ELIZABETH A. MCGLYNN
RAND Corporation, Santa Monica, CA
ARNOLD S. MILSTEIN
Mercer Health & Benefits, San Francisco, CA
SHARON-LISE NORMAND
Harvard Medical School, Boston, MA
BARBARA R. PAUL
Beverly Enterprises, Inc., Fort Smith, AR
SAMUEL O. THIER*
Harvard Medical School, Massachusetts General Hospital, Boston, MA
ARTHUR LEVIN
Center for Medical Consumers, New York, NY
GLEN P. MAYS
University of Arkansas for Medical Sciences, Little Rock, AR
PAUL J. WALLACE
Kaiser Permanente Care Management Institute, Oakland, CA
QUALITY IMPROVEMENT ORGANIZATION PROGRAM EVALUATION
STEPHEN M. SHORTELL (Chair)*
University of California, Berkeley
ANNE-MARIE AUDET
The Commonwealth Fund, New York, NY
JACK L. COX
Premier, Inc., Charlotte, NC
DAVID H. GUSTAFSON*
University of Wisconsin, Madison
JEFF KANG
CIGNA Health Care, Hartford, CT
ALAN R. NELSON*
American College of Physicians, Fairfax, VA
GREGG PANE
District of Columbia Department of Health, Washington, DC
BARBARA R. PAUL
Beverly Enterprises, Inc., Fort Smith, AR
WILLIAM A. PECK*
Washington University School of Medicine, St. Louis, MO
ERIC D. PETERSON
Duke University School of Medicine, Durham, NC
SHOSHANNA SOFAER
Baruch College, New York, NY
Foreword
This report is the third in a series called Pathways to Quality Health Care. Led by the Committee on Redesigning Health Insurance Performance Measures, Payment, and Performance Improvement Programs, these reports promote a health system that meets patients’ needs and is based on sound scientific evidence. The Pathways series extends the work inaugurated by the Institute of Medicine (IOM) in its 2001 report Crossing the Quality Chasm. That earlier report laid out a blueprint for reforming health care through systems improvement. The new series of reports provides strategies for creating and implementing change that will help bridge the quality chasm.
The Committee on Redesigning Health Insurance Performance Measures, Payment, and Performance Improvement Programs was composed of 23 individuals who are among the top experts and leaders on health care in the country. They and IOM staff carefully reviewed the literature and gathered data on measurement, quality improvement, and pay for performance to provide an evidence base for the Pathways reports. Although the committee members come from different backgrounds, disciplines, and perspectives, they reached a common understanding of the problems to be addressed, shared a sense of urgency, and converged on three major sets of recommendations. The committee saw the need to reform health care payment methods that promote inappropriate or inefficient behaviors and that impede progress toward better quality care. Their central ideas about payment that rewards higher quality, establishment of a National Quality Coordination Board to guide performance measurement, and restructuring
Quality Improvement Organizations to offer technical assistance in the best methods to increase quality all point to a better-performing health system.
Requests for this report, as well as the preceding two in the Pathways series, were embedded in the Medicare Modernization Act, and therefore focus on Medicare programs. The committee’s recommendations, like the Medicare program itself, ramify beyond Medicare’s direct beneficiaries. Implementation of these recommendations by the Medicare program could influence adoption by other purchasers and payers of care. Medicare’s use of particular performance standards can eventually raise the quality of care all Americans receive.
Chairman Steven A. Schroeder has skillfully guided this committee through three important studies. He and all of the committee members deserve our thanks for so generously contributing their time and expertise. They served as volunteers for more than 2 years, and their individual and collective commitment to improving the quality of health care is laudable. By implementing their recommendations, we can convert their service into results that benefit all Americans.
Harvey V. Fineberg, M.D., Ph.D.
President, Institute of Medicine
August 2006
Preface
Rewarding Provider Performance: Aligning Incentives in Medicare is the third and final report of the Committee on Redesigning Health Insurance Performance Measures, Payment, and Performance Improvement Programs. This committee’s efforts have been in response to two separate congressional mandates embodied in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173, Sections 109 and 238). These mandates provided the Institute of Medicine with the opportunity to build on an earlier series of reports, called the Quality Chasm series, which created a goal for the American health system of health care that is safe, effective, patient-centered, timely, efficient, and equitable. This committee’s three reports form a new series, called Pathways to Quality Health Care, which offers strategies for achieving that goal.
The first report in the Pathways series, Performance Measurement: Accelerating Improvement, focused on measuring the quality of health care services. Many individuals and organizations, as well as health care providers, are working on creating, implementing, and reporting measures to determine how well health care is delivered. The committee perceived a national need to standardize measures in order to minimize the burden on providers of collecting and reporting data and to facilitate the use of this information by consumers and purchasers of services. Thus, it recommended a starter set of performance measures and areas in which measures need to be developed. To coordinate the implementation of a standard set of performance measures, further the research and development needed to create and implement new measures, and facilitate public reporting, the committee recommended a National Quality Coordination Board.
In its second report, Medicare’s Quality Improvement Organization Program: Maximizing Potential, the committee examined the Quality Improvement Organization (QIO) program in Medicare. It concluded that the QIO program could form a critical infrastructure to help improve providers’ performance and their reporting of measures. Given the growing emphasis on performance measurement and public reporting of those measures for a broad range of health care providers, as well as payment incentives, the committee expects providers to increasingly seek assistance from their local QIO. The committee recommended that the program be restructured to focus on technical assistance to health care providers and to strengthen the governance of QIOs and program management.
For this third report, the committee examined the evidence concerning various public- and private-sector programs designed to align payment incentives to promote better-quality care by rewarding providers who perform well. Because the current basic payment systems reward overuse of services and use of high-cost complex procedures and do not acknowledge the wide variations in quality across providers, the committee concluded that payment reforms are needed now to recognize care that is of high clinical quality, patient-centered, and efficient. To help implement payment incentives within Medicare, the committee proposes a phased approach and offers guidance on creating pools of funds to reward performance and submission of performance data, and mechanisms for monitoring of implementation to avoid unintended consequences. The committee believes that implementation of the recommendations in all three reports would provide a strong start toward improving the quality of care for all Americans.
It has been an honor to serve as chair of the Committee on Redesigning Health Insurance Performance Measures, Payment, and Performance Improvement Programs, and I am grateful to all the committee members and staff for their hard work, willingness to reach consensus, and ability to produce such an ambitious series of reports. I especially want to recognize the members of the Subcommittee on Pay for Performance and its co-chairs, Robert Reischauer and Gail Wilensky, for their contributions to this report. Also, Rosemary Chalk deserves particular thanks for taking over as project director. Our collective efforts have produced these three reports; it is now up to you, our readers, and your various communities, along with Congress and the Centers for Medicare and Medicaid Services, to make the vision contained in these reports a reality.
Steven A. Schroeder, M.D.
Chairman
August 2006
Acknowledgments
Rewarding Provider Performance: Aligning Incentives in Medicare benefited from the contributions of many individuals. The committee takes this opportunity to recognize those who so generously gave their time and expertise to inform its deliberations. The committee wishes to acknowledge the members of the Subcommittee on Pay for Performance and the outstanding leadership of co-chairs Robert Reischauer (Urban Institute) and Gail Wilensky (Project HOPE). John Ring and Clyde Behney also contributed as directors of the Board on Health Care Services of the Institute of Medicine.
The committee benefited from presentations made by a number of experts. The following individuals shared their experiences and perspectives: Trent Haywood and Lisa Magno from the Centers for Medicare and Medicaid Services (CMS) on CMS’s pay-for-performance initiatives; Francois deBrantes from Bridges to Excellence (BTE) on incentivizing patients/consumers and lessons learned from the development of the BTE program; Bruce Landon and Meredith Rosenthal through their commissioned paper “Paying for Physician Quality in Traditional Medicare”; Mark Miller and Karen Milgate of the Medicare Payment Advisory Commission (MedPAC), on MedPAC’s recommendations on pay for performance and also Medicare data runs; and Shari Erickson of the National Quality Forum on health information technology. We would also like to thank those representatives of the various medical associations who generously provided presentations addressing their organizations’ positions on pay for performance, including Nancy Nielson of the American Medical Association, John Tooker of the American College of Physicians, Rosemarie Sweeney of the American Acad-
emy of Family Physicians, Carole Johnson of the Alliance of Community Health Plans, Frederick L. Grover and Jeffrey Rich of the Society of Thoracic Surgeons, Joseph S. Bailes of the American Society of Clinical Oncology, William L. Rich III of the American Academy of Ophthalmology, and Arl Van Moore Jr. of the American College of Radiology.
The committee would like to acknowledge organizations that provided us with feedback on their pay-for-performance position statements: Alliance of Community Health Plans, Alliance of Specialty Medicine, American Academy of Family Physicians, American College of Cardiology, American College of Physicians, American Medical Association, National Business Group on Health, National Patient Advocacy Foundation, and Society of Thoracic Surgeons.
We also wish to acknowledge Marie-Adele Sorel, a Truman Scholar during the summer of 2005, who provided significant contributions to this report. Thanks to Meredith Rosenthal for consulting on this report.
Finally, the committee gratefully acknowledges CMS, whose funding supported this congressionally mandated study.