Improving clinical quality and sharing the profits with your physicians

Physician Executive, May-June, 2004 by James Reynolds, Daniel Roble

In the world of health care today, it is widely recognized that quality initiatives must be implemented to:

* Reduce needless mortality and morbidity

* Provide best practice care

* Reduce variation in methods of care

* Develop a reimbursement system that rewards best practices and penalizes unacceptable and unnecessary care

* Reduce costs through substantial elimination of overuse and misuse of health care resources

The health care industry cannot sidestep these changes. As a result, "pay-for-performance" initiatives by insurers and employers that offer some form of financial incentive to either physicians or hospitals for delivering the "right kind of care" are quickly spreading throughout the country.

These initiatives, however, have not yet been applied to hospitals and physicians working together because of perceived practical difficulties in collaborative physicianhospital relationships and various legal impediments. But they'll be commonplace soon.

Who's behind the demand?

Six industry forces are supporting new and wide-ranging demands on hospitals and physicians for patient safety and clinical performance improvements.

1. Scientific leaders -- The IOM's 1999 report. "To Err is Human," which focused on clinical quality, patient safety and avoidable deaths in hospitals, led to a continuing series of IOM reports calling for key changes in the organization, delivery and reimbursement of hospital-based care.

2. Buyers -- The Leapfrog Group, one of the nation's leading employer coalitions, adopted some of the IOM's recommendations and is focusing its efforts on the adoption of quality and safety standards for hospital care, payment programs based on incentives and rewards, public recognition and a shift of volume to hospitals and doctors who meet Leapfrog standards.

3. Financial intermediaries -- Insurers, managed care organizations and the Centers for Medicare and Medicaid Services are implementing pay-for-performance programs that provide rewards for physicians and hospitals that meet their established quality and cost targets.

4. Consumers -- Patients are becoming more empowered through easy access to performance-related information on the Internet and are being put more at risk for the cost of their health care benefits as their employers shift to defined contribution plans.

5. Technology vendors -- The use of continually evolving hi-tech capabilities such as computerized physician order entry, electronic medical records, clinically oriented information systems, evidence-based protocols and clinical process redesign, while expensive, are becoming almost mandatory to meet the expectations of purchasers.

6. Capital markets -- Lenders are quite willing to make investment capital available for these investments to credit-worthy hospitals, and credit-worthiness is best demonstrated by a track record that shows consistently above-average returns on such investments.

The measurements of quality

Health care technology vendors are offering hospitals an array of sophisticated computerized information systems that support proactive management of the clinical care process.

Severity-adjusted comparisons of clinical quality at the subspecialty level permit physicians and managers to identify poor outcomes and then set priorities for the investment of scarce staff time and resources to redesign clinical pathways that obtain the greatest return on investment in terms of improved clinical outcomes and cost per case. (Figure 1)

Similar comparisons of outcomes among physicians can allow a hospital to identify which have better/worse outcomes and test hypotheses on relationships between differing practice patterns and outcomes.

At the payer level such comparisons permit hospital managers to identify problems with contract terms, payment rates and cost per discharge that can be used to reveal unexpected numbers of denials, serve as a basis for renegotiating some contract terms, or even focus on resource consumption patterns.

Moreover, such comparisons may allow managers to negotiate better payment terms so that the hospital, as the investor in quality improvement initiatives, will share the return on investment with the payer.

Direct physician involvement is an absolute must in accomplishing clinical performance improvements, some of which are directly physician-driven (such as over-ordering imaging studies) while others are a function of the hospital's operating policies (such as delays in reporting imaging results). In either case, physician understanding and support is critical to identify, implement and monitor improvements.

(See figures 2 and 3 for examples of clinical performance measures.)

Quality gain sharing takes root

Quality gain sharing programs are being developed to actively engage physicians in the clinical improvement process and overcome their frequent lack of interest and/or resistance to participating in hospitals' quality improvement efforts.

Four factors are key to the success of gain sharing:

1. A sufficient number of improvement opportunities