Hospitals’ Experiences with Pay-for-Performance and Pay-for-Reporting

1. Hospitals’ Experiences with Pay-for-Performance and Pay-for-Reporting Melony E. Sorbero, Cheryl Damberg, Susan Lovejoy, Ateev Mehrotra, Stephanie Teleki June 9, 2008 Funded under contract from the Assistant Secretary for Planning and Evaluation and the Centers for Medicare & Medicaid Services

2. Background and Policy Context • Public and private sectors increasingly using pay for performance (P4P) as a policy mechanism to drive improvements in quality and cost efficiency • 2003 Medicare Modernization Act • Established Medicare’s Pay-for-Reporting (P4R) program (RHQDAPU) for Section (d) hospitals • 10 measures (pneumonia, congestive heart failure, and acute myocardial infarction) • 2005 Deficit Reduction Act (DRA) • Expanded RHQDAPU (# of measures and $$ at risk) • Required Secretary of DHHS to develop Value-Based Purchasing (VBP) plan for Medicare hospital services to be implemented starting October 2008

3. Background • RAND provided contractor support for overall plan development, working with CMS VBP workgroup • Measures • Data infrastructure and validation • Incentive structure • Public reporting • RAND conducted a literature review and an environmental scan of existing P4P and P4R programs • Little empirical evidence on hospital P4P • Environmental scan designed to capture the experiences of program sponsors and hospitals with P4P and P4R, to inform the development of hospital VBP plan

4. Environmental Scan Methods • Conducted semi-structured interviews with hospital leadership between October 2006 and March 2007 • Purposive sample of hospitals drawn from hospitals that were: • Eligible for CMS’ RHQDAPU pay-for-reporting program • Eligible to participate in the CMS-Premier Hospital Quality Improvement Demonstration (PHQID) • Participating in a private-sector P4P program • Major hospital associations • Data vendors • Topics covered in interviews: • View of and experiences with P4R and P4P • Impact on hospital from participation in P4P and P4R • Challenges and lessons learned • ROI of program participation • Recommendations for P4P program design

5. Interview Participants • 28 hospitals • Participated in PHQID (n=7) • Eligible, but did not participate in PHQID (n=5) • Participated in private-sector P4P program (n=5) • Small or CAH that submitted data to RHQDAPU (n=7) • Failed RHQDAPU data validation (n=3) • Elected not to participate in RHQDAPU (n=1) • 7 hospital associations • 5 data vendors supporting data submission for RHQDAPU

6. Summary of Principal Findings

7. Hospitals Gearing Up for CMS VBP • P4P viewed as inevitable by hospitals • RHQDAPU and PHQID allow hospitals to “prepare” • Data Collection • Submission • Validation • Start making quality improvements prior to P4P • Generally positive about RHQDAPU • Included measures address important areas • Appropriate for hospitals to be held accountable • RHQDAPU and P4P programs have led to greater focus on quality by hospital boards and leadership • “No one wants to be on the bottom of the public report card.”

8. P4R and P4P Participation is Resource Intensive • Data collection, validation, CQI are labor intensive • Electronic medical records are not able to fully support information needs • Data collection burden viewed as important measure selection criterion • Incentive payments generally do not match level of investment • 2% Annual Payment Update amount held at “risk” may cover costs for some hospitals • Hospitals not calculating ROI • Coordination and alignment with other programs and hospital reporting requirements is critical • At the measure specification level

9. Engaging Physicians is a Challenge • Due to laws barring gain-sharing arrangements, hospitals cannot financially incentivize physicians on measures included in RHQDAPU or PHQID • “Incentives are not aligned between physicians” • Struggle with ways to ensure physician compliance • “Doctors don’t like to practice cookbook medicine” • Doctors “don’t like to be told what to do” • Solutions suggested by hospitals • Change in gain-sharing laws • Align physician measures and incentives

10. Challenges Faced by Small Hospitals • Small hospitals have more limited resources to collect data • Don’t provide measured services, so may be excluded from program • “We should only be measured on what we actually do” • Problem of few cases to be scored • Performance isn’t reported • Performance scores are unreliable • Substantial variation in performance between time periods • Creates challenges for quality improvement within hospitals when rates fluctuate (no clear signal)

11. Hospitals Dislike Use of Relative Thresholds for Determining Payouts • Creates uncertainty about what it takes to win • “Don’t know until after the fact, once hospitals are rank ordered, what is required to win.” • Penalizes hospitals who achieve high (but not top) performance when scores are compressed • Hospitals dedicate resources to achieve non-meaningful improvements in performance • May create unintended consequences as measures top out • Resources being dedicated to make improvements with no net clinical gain • Encourages cheating • Strong preference for absolute thresholds and a minimum standard of performance

12. Hospitals’ Advice for P4P Program Design • Reward everyone that does well • Only pay on improvement if a minimum performance threshold is set • Provide regular performance feedback • Focus on measures for core areas with high expenditures and patient volume • Use evidence-based measures • Utilize risk-adjustment as appropriate • Focus measurement on things the hospital controls (e.g. infection rates) • Limit what small hospitals are measured on to what they do • Use all-payer data to avoid small-numbers problem

13. Hospitals’ Advice for P4P Program Design • Educate physicians to improve buy-in • Allow hospitals to directly incentivize physicians • Align physician measurement programs • Provide hospitals supports and technical assistance • Involve hospitals in planning and implementation • Pilot measures prior to payout and reporting • To minimize hospital burden • Coordinate and align with other programs and hospital reporting requirements • Select a “reasonable” number of measure for program • Validate data to prevent gaming

14. Conclusions • Hospitals generally accepting of RHQDAPU and anticipate P4P as a natural progression • Strong preferences for certain program design characteristics • Benefit of these programs is the increased attention on quality by hospital leaders and boards • However, multiple challenges experienced by hospitals • Resource demands of data collection and reporting • Physician engagement

15. Policy Implications • Much learned by hospitals in P4R and P4P programs is not captured in published literature • These experiences would be valuable to policymakers designing or modifying P4P programs moving forward • As effects of P4P - both intended and unintended - are unknown, program evaluation will be necessary component for large scale programs

16. For Additional Information • Poster today on characteristics and experiences of hospital P4P programs: Session C #763 • RAND’s environmental scan report on hospital P4P • http://aspe.hhs.gov/health/reports/08/payperform/index.htm • HHS Report to Congress: Plan to Implement a Medicare Hospital Value-Based Purchasing Program • http://www.cms.hhs.gov/AcuteInpatientPPS/downloads/HospitalVBPPlanRTCFINALSUBMITTED2007.pdf