IOM report on rewarding performance
Rewarding Provider Performance: Aligning Incentives in Medicare
Institute of Medicine
September 2006
The health of senior citizens in the United States is not as good as it should be, given the billions of dollars spent on health care each year. This raises concerns that Medicare is not getting the best value for the services it purchases. Medicare’s current payment system places no emphasis on whether the care delivered is of high or low clinical quality or is appropriate. The system provides few disincentives for overuse of often high cost medical services and does little to encourage coordinated, preventive and primary care that could save money and produce better health outcomes.
This study is the third in the IOM’s Pathways to Quality Health Care series, which offers tools for implementing the vision of improved health care delineated in the Quality Chasm report. The first report in the Pathways series, Performance Measurement: Accelerating Improvement, recommended a strategy for developing and implementing a comprehensive performance measurement system, including a national board to coordinate that effort.
The second report, Medicare’s Quality Improvement Organization Program: Maximizing Potential, recommended an emphasis on technical assistance to providers for quality improvement. The present report builds on those studies and offers an operational plan for introducing into Medicare payment incentives that would encourage and reward high-quality care. While alignment can occur in many areas, this report is limited to examining the link between payment incentives and provider performance.
Recommendation 1: The Secretary of the Department of Health and Human Services (DHHS) should implement pay for performance in Medicare using a phased approach as a stimulus to foster comprehensive and systemwide improvements in the quality of health care.
Recommendation 2: Congress should derive initial funding (over the next 3-5
years) for a pay-for-performance program from existing funds.
* Congress should create provider-specific pools from a reduction in the base Medicare payments for each class of providers (hospitals, skilled nursing facilities, Medicare Advantage plans, dialysis facilities, home health agencies, and physicians.
* Congress should ensure that these pools are large enough to create adequate motivation for improved performance on selected measures. Because of unique challenges of physician payment relating to the SGR, investment dollars may be necessary to create adequate resources to effect change.
* Initial funding should be budget conscious in taking into account the resources needed for both funding the pools and implementing the program.
Recommendation 3: Congress should give the Secretary of DHHS the authority to aggregate the pools for different care settings into one consolidated pool from which all providers would be rewarded when the development on new performance measures allows for shared accountability and more coordinated care across provider settings.
Recommendation 4: In designing a pay-for-performance program, the Secretary of DHHS should initially reward care that is of high clinical quality, patient centered, and efficient.
Recommendation 5: The Secretary of DHHS should design a pay-for-performance program that initially rewards both providers who improve performance significantly and those who achieve high performance.
Recommendation 6: Because public reporting of performance measures should be an integral component of a pay-for-performance program for Medicare, the Secretary of DHHS should offer incentives to providers for the submission of performance data, and ensure that information pertaining to provider performance is transparent and made public in ways that are both meaningful and understandable to consumers.
Recommendation 7: The Secretary of DHHS should develop and implement a strategy for ensuring that virtually all Medicare providers submit performance measures for public reporting and participate in pay for performance as soon as possible. Initially, measure sets may need to be narrow, but they should evolve over time to provide more longitudinal and comprehensive assessments of provider and system performance. For many institutional providers, participation in public reporting and pay for performance can and should begin immediately. For physicians, a voluntary approach should be pursued initially, relying on financial incentives sufficient to ensure broad participation and recognizing that the initial set of measures and the pace of expansion of measure sets will need to be sensitive to the operational challenges faced by providers in small practice settings. Three years after the release of this report, the Secretary of DHHS should determine whether progress toward universal participation is sufficient and whether stronger actions - such as mandating provider participation - are required.
Recommendation 8: CMS should design the Medicare pay-for-performance program to include components that promote, recognize, and reward improved coordination of care across providers and through entire episodes of illness. Thus, CMS should (1) encourage beneficiaries and providers to identify providers who would be considered their principle responsible source of care, and (2) pay for and reward successful care coordination that meets specified standards for providers who take on that role.
Recommendation 9: Because electronic health information technology will increase the probability of a successful pay-for-performance program, the Secretary of DHHS should explore a variety of approaches for assisting providers in implementation of electronic data collection and reporting systems to strengthen the use of consistent performance measures.
Recommendation 10: The Secretary of DHHS should implement a monitoring and evaluation system for the Medicare pay-for-performance program in order to:
* Assess early experiences with implementation so timely corrective action can be taken.
* Evaluate the overall impact of pay for performance on clinical quality, patient-centeredness and efficiency.
* Identify the best practices of high-performing delivery settings that should be shared with others to improve care throughout the nation.
Report brief (4 pages):
http://www.iom.edu/CMS/3809/19805/37232/37236.aspx
Rewarding Provider Performance (full text):
http://darwin.nap.edu/books/0309102162/html/R2.html
Comment:
By Don McCanne, MD
Until now, conceptualizations of pay for performance have not proffered much more than the introduction of additional administrative intrusions that might motivate minimal tweaking of a few practice parameters, but would have a negligible impact on overall health care outcomes.
This Institute of Medicine report sheds further light on the subject. In elaborating on the pay-for-performance concept, the Institute of Medicine makes it very clear that the administrative burden is significant and will divert time and resources away from patient care. But what will that effort attain for us? Sampling of performance will always provide a very incomplete picture of overall performance, and it will favor those who master gaming of the system. The IOM proposal would attempt to improve provider behavior through public humiliation and financial penalties as funds are shifted to those who play the games better. There are already enough pressures on health care professionals without adding this insult.
Pay for performance eventually may become a valuable tool to improve efficiency, quality, and health care outcomes, if anyone can figure out an effective model for doing that. Unfortunately, the gifted individuals at the Institute of Medicine have not yet provided us with that model. Until they do, we should proceed with reform that we know will dramatically improve resource allocation: single payer national health insurance.