New reimbursement models reward clinical excellence: pay-for-performance means that quality and revenue are no longer separate issues for healthcare providers

Healthcare Financial Management, Nov, 2004 by Karen Corrigan, Robert H. Ryan

AT A GLANCE

Pay-for-performance is an emerging payment model that links quality of care with the level of payment for healthcare services. While pay-for-performance programs are still in their formative stages, hospitals need to prepare by intensifying their efforts to ensure systems and processes support high-quality care.

In today's healthcare market, complex reimbursement models pose formidable obstacles to healthcare organizations and professionals alike. Further, greater public scrutiny and disclosure of clinical quality and patient safety performance standards are demanding a new, more equitable and effective reimbursement model for hospitals and physician services.

While still in its infancy, a new model that bases reimbursement on high-quality clinical performance should sweep health care within five to 20 years. Because revenues will vary according to demonstrated quality under this model, the CFO will play a new and vital leadership role in the organization's clinical quality agenda.

Are We Encouraging Poor Performance?

Everyone agrees that traditional healthcare reimbursement models are lacking. The myriad models employed throughout the country today have been more focused on trying to manage utilization through fixed payments, deep discounts, and capitation than focused on quality. What these models have in common is that they treat every provider the same regardless of clinical quality, outcomes and, in fact, may have the perverse effect of rewarding poor quality performers for adverse outcomes requiring additional patient care.

"Other industries have learned to encourage superior performance by rewarding best performers more highly than average and poor performers," says Charles Peck, MD, region head for Healthcare Delivery with Aetna, responsible for the Southeast region's utilization, case, and quality management; compliance; and regulatory affairs. "Unfortunately, in medicine we have dumbed down everyone in a particular market to the average," he adds. "Every doctor gets the same fee schedule regardless of performance. We ought to be paying providers more who operate more efficiently and achieve higher quality at lower cost."

Measurement Tools Document Clinical Quality

In 1999, the Institute of Medicine reported that as many as 98,000 lives are lost in U.S. hospitals each year as a result of preventable medical errors. Transfer those statistics to the airline industry and it's the same as a 300-passenger airplane going down daily. If the airline industry had such statistics, no one would fly. This alarming report set in motion an effort to improve the quality of hospitals and patient safety. The new frontier is to measure high-quality clinical performance and gear reimbursement models accordingly.

Ten to 20 years ago, there was no agreed-upon methodology for measuring quality. In fact, in the 1980s and 1990s, quality was often "assumed" or based on reputations earned because of technologies or rare and complex procedures performed by certain institutions. Only recently, through evidence based medicine, have standards been developed that are more widely agreed to be linked to better outcomes.

Although there is by no means a protocol for every illness, we now have recognized standards against which performance can be measured. A simple example of a measure would be the consistent administration of aspirin to patients who present with cardiac arrest. Aspirin has been proven to save lives and, unless there are contraindications such as allergy, should be administered to cardiac patients in 100 percent of cases, not just 80 or 90 percent. Meeting the standard is as simple a matter as writing protocols that specify when to and when not to administer aspirin. Hospitals that want to measure performance can begin by establishing guidelines for emergency departments similar to those of the airline industry as, for example, the checklist a pilot goes through when taking off or landing. Airlines know that the landing gear has to be deployed on 100 percent of the flights, not just 80 or 90 percent.

The aspirin administration protocol was one of the 10 indicators of The National Voluntary Hospital Reporting Initiative (also referred to as A Public Resource on Hospital Performance) developed by CMS. When asked by CMS to report on these quality marks voluntarily, only about 10 percent of hospitals reported. Since then, CMS has added an incentive under which hospitals that don't report will be penalized financially.

Just this year, the 10 quality measures have been incorporated into the 34 indicators of The Premier Hospital Quality Incentive Demonstration (Rewarding Superior Quality Care) developed by CMS. This three-year demonstration project is a part of the CMS Hospital Quality Initiative launched in 2003, which aims to refine and standardize hospital data, data transmission, and performance measures to create a standard set of quality measures for hospitals. It will recognize and provide financial rewards to hospitals that demonstrate high quality performance in a number of areas of acute care by increasing their payments for Medicare patients. The scores of the 278 participating hospitals will be posted at www.cms.hhs.gov for healthcare professionals.